Spread the load.
- First-time buyers, faced with the rising costs of getting on the housing ladder, are finding ways to offset the increases. They do this by taking longer mortgage terms, flexible deals or paying higher deposits.
- Over half of first-time buyers took a mortgage term of 30 years or longer in 2021–2022. This compares to just one third in 2008–2009.
- Those taking the more usual repayment period of 20–29 years accounted for a further 38%. A small minority (6%) were able to negotiate shorter than 20 years.
- The average monthly mortgage payment for a first-time buyer is currently £1,194 per month. This is up from £1,048 per month last year. Source: #Dataloft (https://dataloftinform.co.uk/), English Housing Survey (2021–2022), Rightmove – typical first-time buyer property, five-year fixed rate, 85% Loan-to-Value mortgage
How times have changed.
Spread the load.
You do not have to be too old to remember the times when 99% of mortgages where over a 25 year period.
There was not even much of an option, if indeed there was any option at all to Spread the load.
As Estate Agents in Harlow, we are seeing the length of mortgages increase all the time!
What changed?
With house prices rising faster than salaries year after year, it became apparent that a lot of people needed the option to Spread the load.
Financial institutions saw this need and longer length of mortgages started to become more common placed.
Affordability is always key. If people simply cannot afford the repayments over a 25 year period anymore, they need options to help spread the load.
How much do monthly repayments reduce over longer periods?
The figures below are based on a £270,000 mortgage at 6.01%:
Firstly, over 25 years the monthly repayments would be £1,742 per month.
Secondly, over 30 years the monthly repayments would be £1,621 per month.
Thirdly, over 35 years the monthly repayments would be £1,542 per month
Finally, over 40 years the monthly repayments would be £1,488 per month.
Whilst it is true that you end up payment a heck of a lot more money back over longer periods (almost £200,000 more over 40 years compared with 25 years), most people who take the longer terms will change length of mortgage as and when rates reduce enough to allow them to do so.