One in five first-time buyers take out 35-year mortgages
ONE in five first-time homebuyers are now taking out mortgages that last up to 35 years.
‘Many people have no choice’
Soaring house prices are forcing young buyers to take extra long loans, research shows.
Mortgages typically ran for 25 years, but over the past decade the proportion of first-time buyers taking mortgages lasting 31 to 35 years has doubled from 11 per cent to 22 per cent.
Some families have even taken out loans for 0 years.
Extending a mortgage brings down the monthly repayments but it can add tens of thousands of pounds in interest to the total cost of the loan.
Last night, experts warned young buyers of the risks of taking out longer mortgages.
David Hollingworth, of the broker L&C Mortgages, which compiled the research, said: ‘Many people have no choice but to take out longer mortgages with the way house prices have risen.
‘However, it’s vital they review their mortgage regularly and overpay where they can, otherwise it will cost them thousands of pounds more.’
In the past ten years, the number of new buyers taking out 25-year mortgages has fallen from 60 per cent to fewer than 0 per cent.
Stretching a £150,000 mortgage at 2.5 per cent interest from 25 to 35 years brings the repayments down from £673 a month to £536.
But it also adds £23,000 to the overall cost because they would repay £75,200 in interest – more than half the size of the original loan – rather than £52,000.