How long do you need for your mortgage?
For many people, the traditional length of mortgage is 25 years. However, the market has evolved in recent times, and there is a much wider range of mortgages on offer in the United Kingdom. There are 40-year mortgages available, and it is fair to say these mortgages are growing in popularity. Some borrowers may never to be able to pay off their debt with a mortgage of this length, but it is easy to see why so many people across the country are interested in a longer mortgage.
When you pay a mortgage back over an extended period of time, the monthly payments are lower. Many lenders are drawn to this, as it provides them with an improved chance of arranging a mortgage which suits their needs. Knowing you can gain access to larger loans is a great comfort to many potential buyers, and this helps lenders reach more customers.
In recent years, lenders have imposed strict criteria on mortgages. However, with a longer time-frame, there is a greater degree of flexibility for borrowers. There is also the fact that mortgage lenders need to make commercial decisions, and they want to receive as many applications as possible. Therefore, 40-year mortgages are likely to appeal to lenders as much as applicants, so it is positive for the industry.
40-year mortgages are on the rise
According to data supplied by Moneyfacts, six out of 10 mortgage deals come with a standard maximum term of 40 years. It should also be noted many lenders have increased the maximum age limit they impose on applications. Therefore, in an era when the average age of first-time buyers is rising, it is not out of the question to see people with a mortgage well into their 70s.
However, the nature of the population is changing. People are living for longer, and in better health. The pension age in in the United Kingdom is set to increase, so there is an argument many people are suitable for a mortgage which is paid off later in life. There is no denying longer mortgages make the application process more welcoming to many potential buyers, but they may also be a reflection on the changing nature of life in the UK.
People want affordable mortgages
The Yorkshire Building Society is a lender who have recently offered a 40-year mortgage. They say this decision has been driven by a higher demand for affordable monthly payments.
Yorkshire Building Society’s Charles Mungroo said: ‘Attitudes of first-time buyers are altering, with an increased demand for larger homes compared to the traditional ‘starter home’ that was once standard to get on the property ladder. Along with more purchases being made later in life and families having to juggle multiple financial commitments, there is a real demand in borrowers wanting to stretch their terms to make their monthly payments more affordable along with borrowing later into life.’
It is good there are more options in the mortgage market, and if 40-year mortgages help people step on the property ladder in an affordable manner, they will be welcomed by the industry.