2021 sees rise in number of 35-year mortgage terms

There has been a sharp increase in the number of mortgage sales with a term of more than 35 years at the beginning of 2021, according to data gathered by Quilter.

A Freedom of Information (FOI) request by the wealth manager revealed that March this year saw 25,112 mortgages sold with a term over 35 years, a 70% increase compared with 14,765 in March 2019.

In March 2018, there were 14,683 were sold while the FOI showed that for three years prior, sales also never surpassed 20,000.

The same FOI request revealed that March 2021 also saw the highest total number of mortgage sales for the past three years, which Quilter suggested was likely due to the original stamp duty holiday deadline of 31 March.

“Following an overall decrease in sales in the first few months of the pandemic, the government’s introduction of the stamp duty holiday caused a rush to the housing market to snap up deals,” commented Quilter mortgage expert, Charlotte Nixon.

“The savings made with the removal of stamp duty, as well as lockdown-driven ‘accidental’ savings, may have allowed buyers to purchase higher cost homes than they would have expected.

“Ultimately, this rush to buy has pushed house prices up significantly across the country and may have contributed to the upswing in buyers opting for longer term deals.”

Quilter also stated that for some borrowers including first-time buyers, securing a mortgage with a 35-year term could be the only way to afford a property due to the lower monthly repayments, but warned of the risks of such long mortgage terms being properly understood.

“One of the largest knock-on effects of securing a mortgage with a term of 35 years is that the longer the mortgage term, the older you will be when making the final repayment,” Nixon added.

“This means that people are likely to be borrowing beyond their retirement age. Whilst some mortgage providers allow this, paying a mortgage in retirement can have a major impact on standard of living with many people becoming unable to comfortably afford the repayments.

“Additionally, whilst a mortgage with a term of 35 years can result in lower monthly repayments, you are likely to pay considerably more in interest over the course of your mortgage term.

“However, whilst there are risks to longer-term mortgages, certain types of these products allow you to make overpayments. This can serve to make repayments past retirement age more manageable. Overpaying will also reduce the amount of interest paid over the term length.”

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