UK Finance: Half of new first-time buyer mortgages have terms over 30 years, up from a quarter ten years ago
Half of all first-time buyers in the UK and over a quarter of home movers who took out a mortgage in the third quarter of last year opted for a term of more than 30 years. This is according to UK Finance’s latest Household Finance Review produced in collaboration with Accenture.
The proportion of mortgages borrowed over longer terms has increased almost continuously since the global financial crisis and accelerated sharply since 2021, reflecting the effects of rising house prices and new mortgage rates on affordability.
Some banks and building societies offer longer mortgage terms of up to 40 years as a way to provide borrowers with sufficiently large mortgages to help them get on the property ladder.
Accord Mortgages, Coventry Building Society, Halifax for Intermediares and Metro Bank are some of the lenders offering mortgage terms up to 40 years, providing applicants they are young enough to qualify.
Aaron Strutt, product director at Trinity Financial, says: “Many first-time buyers want to get on the property ladder, but equally, they don't want to be repaying their mortgages for the next 35 or 40 years. Just because you take a longer term to qualify for the mortgage doesn't mean you have to stick with it.
“Borrowers often lower their terms when their fixed rates finish and their finances improve. They make overpayments to reduce the outstanding balance. More lenders have apps to make it easier for people to set up overpayments when they receive a bonus and have spare cash.”
The average income of borrowers has risen
The UK Finance and Accenture data also shows that new borrowers' average income has risen. The average household income of a first-time-buyer mortgage application in Q3 2022 stood at just under £60,000. This is 17 per cent higher than the same quarter last year. During this time, wage growth was well below this rate, indicating a shift towards higher-income households entering the market as lower-income households struggled to get onto the housing ladder.
Source: UK Finance produced in collaboration with Accenture
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The information contained within was correct at the time of publication but is subject to change.
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