Rise of the 40-year mortgage deal

FAMILIES who are desperate to get on the housing ladder are being bombarded with offers for 40-year mortgages.

More than half of all mortgage products now have this option, compared to only 36 per cent five years ago.

It suggests buyers are having to take out loans so big that they cannot repay them within the traditional 25-year limit.

However, this could leave borrowers paying off debts into their 60s – when previous generations were retired and mortgage-free.

About 71 per cent of mortgages can now last until the borrower is 75 years old.

Lengthening a mortgage term means the loan is paid back more slowly, reducing the size of monthly bills. But it is also more expensive in the long run as interest mounts up. For example, someone borrowing £200,000 over 25 years would repay £897 a month, or £269,170 in total. If the same amount was borrowed at the same rate for 40 years, repayments would be £660 a month but £316,587 in total.

Darren Cook, from financial experts Moneyfacts, which carried out the research, said: ‘The longer a borrower extends their mortgage term, the older they will be when they have finally repaid their mortgage.

‘An extended mortgage term may go beyond pension age – so it is imperative that these borrowers consider their options and attempt to make provisions if their personal circumstances change.’

Figures from the latest UK House Price Index, taken from December 2018, show the average price of a property in Scotland is £149,000. The typical worker earns £29,600.

It will now take a first-time buyer in their late 20s an average of 18 years to save up for a deposit, says the Resolution Foundation think tank. This is up from three years in the 1990s.

A record 56.2 per cent of borrowers are now taking out loans equal to more than three times their annual income.

One in nine new borrowers is a singleton taking out a mortgage more than four times their annual pay, says banking trade body UK Finance.