30- year mortgage term can be a millstone

More UK home buyers forced to go in for longer duration tenors

Soaring numbers of UK home buyers are taking out mortgages that will last 30 years or more, amid warnings that they are signing up to a lifetime of debt. One in five of the 171,000 loans taken out in the second quarter had a term of 30 years or longer, according to the Council of Mortgage Lenders.

Among first- time buyers the figure was even higher, at 28 per cent. Experts warned that borrowers with a long loan period will pay far more interest — and could still be in debt when they retire.

Traditionally, mortgages last for 25 years, meaning a first- time buyer in their twenties could be free of debt by their early fifties. Ten years ago, only 4.5 per cent of borrowers chose mortgages of three decades or more.

But increasing numbers are opting for loan terms of 30, 35 or even 40 years, because soaring prices mean it is the only way they can get on the property ladder. The average age of first- time buyers has risen to 30, while many in hot spots such as London cannot afford to buy until their mid- thirties, meaning those with 30- year loans could be saddled with debt well into their sixties or beyond. Most lenders set an age limit of 75 by which loans must be repaid.

A longer term means lower monthly payments, but experts warn that the longer the mortgage, the higher the total interest. For example, you might pay £ 100,000 more for the same loan if you paid it back over 35 years rather than 20, based on a £ 200,000 mortgage charging 5 per cent interest.

David Hollingworth, of London and Country Mortgages, said: “It ultimately raises the question of when people will ever be free of debt. People may think of it as more like a life sentence than a loan.”