A significant number of borrowers may end up paying their mortgage into retirement as rising house prices cause them to elongate their mortgage terms, according to new research from Knowledge Bank.
The criteria search specialist suggested that borrowers are attempting to stretch mortgage terms to 35 years and in some cases even to 40 years.
According to Knowledge Bank’s latest criteria tracker, “maximum age at end of term” was the most-searched term by brokers in August, backing up recent research by Quilter that showed a 70% rise in 35 year-plus mortgages over the past two years.
Knowledge Bank suggested the trend for elongated mortgages could be a result of rapidly increasing house prices over the past 12 months, with higher prices creating affordability issues and some borrowers looking to spread their mortgage out over a longer time period to lower their monthly repayments.
“With house prices accelerating at unprecedented levels, it’s not surprising borrowers are looking to lower monthly payments by stretching terms,” commented Knowledge Bank operations director, Matthew Corker.
“Even first-time buyers in their early 30s are now stretching terms close to, or beyond retirement age. Terms for lenders vary in regards to age limits, some building societies have no max age limit, other lenders tend to limit the maximum age to 70 to 85 years old.
“The expectation from the lender is that the borrower will either overpay, or shorten the term when remortgaging, but this could present an issue for some who are still having to work into their seventies to pay off their outstanding mortgage debt.”
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