“Marathon mortgages” are fast becoming the norm as two-thirds of borrowers aged under 30 have terms of between 30 and 40 years
Tags: Residential mortgages
Quick Summary
Longer mortgage terms of 30 to 40 years are becoming increasingly common among younger homeowners. New Sprive analysis of more than 190,000 borrowers found that 66% of homeowners under 30 have mortgage terms of between 30 and 40 years, compared with 42% of those aged 30 to 39 and just 6% of borrowers aged 40 to 49.
A longer mortgage term can reduce monthly repayments and help improve affordability, but borrowers will usually pay more interest over the lifetime of the loan. Major lenders including Nationwide, Barclays, Santander, HSBC and Accord Mortgages can offer mortgage terms of up to 40 years, subject to age, affordability and lending criteria.
Trinity Financial’s brokers can compare long-term mortgages from more than 90 lenders and help borrowers work out the right balance between monthly affordability and the overall cost of their mortgage. Call 020 7016 0790 to discuss your options.
The overpayment app Sprive reveals two thirds of homeowners under 30 have mortgage terms of between 30 and 40 years
- 66% of homeowners under 30 have mortgage terms of between 30 and 40 years
- Just 6% of homeowners aged 40-49 have mortgage terms this long
- On average, under-30s will not be mortgage free until they are almost 60
Young homeowners are increasingly signing up to mortgages that will last for up to four decades, according to new analysis from mortgage overpayment app Sprive.
Analysis of more than 190,000 homeowners shows that two thirds (66%) of mortgage holders under 30 are now on terms of between 30 and 40 years. By comparison, less than half (42%) of homeowners aged 30-39 have mortgage terms that long, falling to just 6% of those in their 40s.
As a result, today's young homeowners are typically on course not to own their home outright until they are 59 years old.
Despite these longer repayment periods, thanks to higher loan to values and rising mortgage rates - under-30s have an average mortgage rate of 4.50%, compared with 3.89% for homeowners aged 40-49 - monthly mortgage payments remain above £1,000 across every age group.
Under-30 homeowners pay an average of £1,008 a month, rising to £1,138 among those aged 40-49 before easing later in life.
Aaron Strutt, product director at Trinity Financial, says: "Just because you initially sign up to a really long mortgage term, it does not mean you cannot reduce the mortgage term when you come to remortgage. Maybe this is a few years after you've got on the property ladder and you are earning more money. Often the best time to do this is when it's time to remortgage and select a new fixed or tracker rate, or switch to a new lender."
Jinesh Vohra, CEO of Sprive, said: "Longer mortgage terms have become the price many younger buyers have to pay to get onto the property ladder. Spreading repayments over 30 or even 40 years can make monthly payments affordable, but it also means paying interest for much longer and staying in debt well into later life.
"The good news is that there are ways to cut the debt; making overpayments, even relatively small ones, can shave years off the mortgage and save tens of thousands of pounds in interest. Many people don't realise how much difference regular overpayments can make.”
On average, Sprive users have a mortgage of £202,000 on a rate of 4.14% over 25.6 years, pay just under £1100 a month, and are currently on track to be mortgage-free at 63 years old. However, someone with the same mortgage balance, term, and rate could save more than £10,700 in interest and become mortgage-free almost two years earlier by overpaying just £50 a month.
Increasing this to £100 a month would save more than £19,700 in interest and cut the mortgage term by more than 3.5 years.
Which lenders offer longer mortgage terms?
| Mortgage lender | Maximum mortgage term offered | Key lender mortgage term criteria |
|---|---|---|
| Nationwide Building Society | 40 years | Nationwide allows mortgage terms of up to 40 years, subject to its age and affordability criteria. |
| Barclays for Intermediaries | 40 years | Barclays maximum residential mortgage term is 40 years, depending on individual circumstances. |
| Santander for Intermediaries | 40 years | Santander allows residential mortgage terms of up to 40 years, subject to its lending criteria. |
| HSBC for Intermediaries | 40 years | HSBC allows up to 40 years on new residential capital repayment mortgages and additional borrowing. |
| Accord Mortgages for Intermediaries | 40 years | Accord offers terms of up to 40 years for new residential business and remortgages, subject to age restrictions. |
Source for table above: Lender websites
Source for article: All data taken from Sprive database of more than 190,000 homeowners with overpayment calculations from the Nationwide calculator.
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The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.
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