MORTGAGED UNTIL YOU DIE

Record number of deals over 40 years means we may never pay them off

MANY homeowners could be in debt until they die as High Street lenders offer record numbers of 40-year mortgage deals.

lenders are also increasing the maximum age at which borrowers can repay their final instalment, allowing them to be saddled with debt well after retirement.

The Yorkshire Building Society has become the latest to increase the age cap of a borrower at the end of a mortgage from 75 to 80.

But there is no age limit on 700 deals on offer by high street lenders, according to a report by the comparison website Moneyfacts. Some 1,138 have an age cap of between 80 and 84, and 317 have a limit of 85-plus.

Rising property prices and tougher affordability checks mean banks are increasingly willing to allow those desperate for a home loan to spread their repayments over four decades.

Almost six in ten of the deals available now have a standard term of up to 40 years, according to the report. This equates to 2,782 loans, or 57 per cent of those on offer. Five years ago, 36 per cent of loans – or 1,096 – had a 40-year term.

Today more than a third (36 per cent) of deals are 35-year loans, while only 3.4 per cent are traditional 25-year packages.

Five years ago, around a fifth of loans spanned up to 30 years and 7.5 per cent were for 25 years. Traditionally, the majority of mortgages had a standard term of 25 years and had to be paid off at retirement age.

For many, longer-term deals are the only way they can afford to buy a home.

But John Mann, an independent MP and member of the commons Treasury committee, said: ‘This means many more people will be lumbered with mortgage debt until their old age or even until they die.

‘There is a big danger that cheap money is persuading people to over-extend themselves.’

Wes Streeting, a labour member of Treasury committee, said: ‘Mortgage lenders need to tread carefully as the last thing many people will want is to leave their debts to their loved ones when they die.’

Bank of England figures show only 2.5 per cent of new mortgages were for 35 years or more in 2005. This had risen to nearly 16 per cent by 2017.

The latest data from the Financial Conduct Authority show 41 per cent of mortgages had terms of more than 25 years.

While 40-year deals allow borrowers to reduce their monthly repayments, experts say they can also rack up tens of thousands of pounds more in interest payments by paying their loan back over a longer period.

UK Finance, which represents mortgage lenders, said: ‘longerterm mortgages tend to have lower monthly repayment options, providing an affordable route to home ownership.

‘This demonstrates how providers are lending responsibly within the FCA’s affordability rules and making sure borrowers can afford their mortgages, at the same time helping customers buy their ideal home.’