Why the longer-term 40-year mortgage is now the norm

Lenders are moving towards offering more longer-term mortgages; where once 25-year terms were the norm, more lenders now give borrowers the option of having a maximum of 40 years to repay their home loan.

The latest research from moneyfacts.co.uk shows that half of all residential mortgage products (50.89 percent) available to home buyers now offer a maximum term of up to 40 years. Five years, only just over a third (35.93) included that option.

Consequently, there are now far fewer products on the lending market with the option of 25 or 30-year terms, reflecting the changing landscape in mortgages since 2008.

Easier to pay over longer term

Tighter rules on lending and tougher criteria on eligibility including stress testing mean borrowers who might fail to convince a lender they can repay a mortgage over 25 years may be more successful in showing they can do so over a much longer time.

Darren Cook, finance expert at moneyfacts.co.uk, said:

“By extending their mortgage term, borrowers may be looking to reduce their monthly repayments and therefore are more likely to meet strict affordability requirements.

“Not only are the number of mortgages at a maximum term of 40 years increasing, but the number of products at maximum 25-year and 30-year terms are decreasing.

Borrowers getting older

Meanwhile, moneyfacts.co.uk also noted that lenders are also extending the maximum age at which a borrower can be when their mortgage ends. As the population is generally living longer and the retirement age rising, so too is the age at which we can have a mortgage, with two-thirds (71 percent) of all mortgages now available until the borrower is 75 years old or older.

A longer-term mortgage means paying extra interest, so a 40-year loan may not be ideal for everyone.

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