Banks face crackdown on 30-year home loans

BANKS are expected to face a clamp- down on long-term mortgages after a surge in borrowers taking out

loans for 30 years or more. The sharp rise is thought to be one focus of the Bank of England’s concerns over the London property market, where house prices have been rising at almost 20 per cent a year.

The escalating cost of buying a home has pushed borrowers to take out longer loans, far beyond the typical 25-year mortgage.

In 2000, the proportion of mortgages of 30 years or more was just 1.6 per cent, but by 2012, 27 per cent of all new mortgages were for 30 years or more. This percentage is likely to rise still further.

Now, the Bank of England’s Financial Policy Committee is expected to crack down on 30-year-plus loans, especially where they extend into retirement.

The International Monetary Fund last week urged the Bank of England to take action to cool the UK property market.

Figures out this week will also show that borrowers are anticipating interest-rate rises by looking to fix their mortgages. In the fourth quarter of 2013, 80 per cent of borrowers took out fixed-term deals, against 64 per cent the year before.

Dominik Lipnicki, of brokers Your Mortgage Decisions, believes the reason for this is simple. He says: ‘Most people expect rates to raise over the next 12 months.’

Experts at price comparison site Totallymoney.com anticipate mortgage rates to rise to 4.7 per cent within two years, from an average of 3.7 per cent now.