The government’s stamp duty holiday drove thousands to opt for marathon mortgages, new freedom of information data from the FCA gathered by Quilter has revealed.

In June 2021, 35,046 mortgages were sold with a term of 35+ years, a staggering 209% increase compared with 11,320 in June 2020. In September 2021, 28,112 were sold, a 73% increase compared with 16,066 in September 2020. This leaves “many vulnerable to higher costs over the longer term”, Quilter stated.

Alongside the increase in the number of mortgages sold, the average house price rose rapidly throughout 2021. By the final withdrawal of the stamp duty holiday on September 2021, the average house price had reached £287,895 – an 11.8% increase compared to a year prior.

Quilter mortgage expert Charlotte Nixon said: ““The lure of the stamp duty holiday was strong, particularly as it came at a time when many people had built up extra savings due to the lockdown. While many jumped at the opportunity to save on stamp duty, they may well now be stuck in long mortgages that will cost them considerably more in the long term. Those who purchased a house for the average house price in June and September 2021 saved £3,283 and £2,499 on stamp duty costs respectively. But to take advantage of this saving many had to opt for a longer mortgage term to ensure it was affordable. However, had they held off until they could afford a standard length mortgage, they could well have saved themselves a lot more money in the long run than just the stamp duty savings.

“For example, the overall cost of a 35-year mortgage term on the average home in September 2021, with a 15% deposit and a 2% interest rate, would have been £383,732. Had the same property purchase been made with a 25-year mortgage term, the overall cost would have been £311,220 – a huge saving of £72,512. For the same scenario in June 2021, the overall saving would have been £66,914. When compared to these figures, it made very little sense to stretch the mortgage terms to benefit from the stamp duty savings, but the data suggests that’s what many people did as deadlines approached.

“The overall cost of a 35+ year mortgage may well have been an afterthought for those looking to take advantage of the scheme, particularly when rushing to meet the withdrawal deadlines. However, rushing to buy will not have resulted in the savings many believed they were securing, as they will now be faced with the cost of interest for the duration of a longer mortgage term.”

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