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First-time buyers hit as longest mortgage terms vanish – Quilter

  • 08/02/2021
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First-time buyers hit as longest mortgage terms vanish – Quilter
Just 27 mortgages with a term of more than 40 years were approved in the first nine months of 2020 illustrating a further squeeze on first-time buyers.


The figures, which came from the Financial Conduct Authority (FCA) following a Freedom of Information request by Quilter, highlighted the dramatic fall from 2,400 in the same period of 2019.

And this slump was in contrast to the number of 35 to 40-year deals agreed which remained stable at 24,000.

Overall the proportion of mortgages longer than 25 years remained consistent compared to the previous three years at 43 per cent of the total.

However, the figures showed that the tightening of the longest-term deals had begun in 2019.

In 2017 and 2018 9,316 and 9,575 mortgages of more than 40 years were agreed in the year to September – both 1.1 per cent of the overall total of approved mortgages.

This dropped to 0.27 per cent of deals in the first nine months of 2019, before the more significant fall last year.

Quilter suggested the dramatic drop was likely to be because there were fewer providers offering such terms and those that were did not offer the high loan to value (LTV) for that period, which is required by younger buyers who tend to favour longer terms.


Don’t enter into lightly

Gemma Harle, managing director of Quilter Financial Planning, noted that since stricter affordability rules were introduced in 2014, lenders have allowed borrowers to extend the term of their mortgages to reduce initial monthly payments and ultimately enable them to pass affordability assessments.

However, she added while this can be a good way for borrowers to get their foot on the property ladder they can end up paying significantly more over the course of the mortgage despite lower monthly payments.

“It is understandable that the popularity of longer mortgage terms has boomed in recent years as house prices have continued to rise at a faster rate than wage growth,” Harle said.

“While there is nothing inherently wrong with a longer mortgage it is not something to be entered into lightly as the costs can be considerably more.”


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