30-year+ mortgages now majority of the market

Over half (51%) of mortgage borrowers are now opting for a 30-year+ mortgage, Mojo Mortgages research has revealed.

Longer terms serve to keep monthly costs down, even if the eventual cost of the loan is higher.

In the buy-to-let sector terms tend to be lower, though they’re still climbing. The typical term for a buy-to-let mortgage in 2023 was 24, up from 23 in 2021.

For first-time buyers the average term length was 29, up from 28 in 2021.

Kellie Steed, the mortgage expert at Uswitch, said:

“According to the Zoopla house price index, the current average property value in the UK is £264,500, which means someone on an average salary (£34,900) would need to borrow more than seven times their annual salary to take out a large enough mortgage to buy it.

“The vast majority of lenders cap their lending way below this, at around 4-5 times annual income.

“It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum.

“However, first-time buyers are not the only ones affected.

“There has been a less significant, but certain increase in average mortgage term lengths across the board since the Bank of England base rate began to rise in December 2021.”

There’s evidence that existing borrowers are extending their terms to keep monthly costs down, as the term length for remortgagors rose to 23 in 2023, up from 21 in 2021.

Uswitch advised potential buyers to consider alternatives to taking out what it labelled ‘mammoth mortgages’: Joint mortgages with multiple applicants; schemes like shared ownership, deposit unlock and rent-to-buy; as well as mortgages that allow family and friends to aid affordability, like joint borrower sole proprietor.

Kindly shared by Property Wire