First-time Buyers

Borrowers turn to longer mortgage terms to cut monthly costs

Borrowers turn to longer mortgage terms to cut monthly costs
Christina Hoghton
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Christina Hoghton

More than half (57%) of those taking out a mortgage in 2023 chose a term of 25 years or longer, said Uswitch.

Plus, demand for mortgages with terms of 40 years or more rose by 16% last year, according to mortgage tech business Twenty7tec.

Lenders have adapted their products to meet this demand, with most (86%) mortgages now having the option of terms up to 40 years.

Uswitch mortgage expert, Kellie Steed, said: “The ‘average’ 25-year mortgage term is increasingly becoming a thing of the past.

“The last year has seen a plethora of news reports on the growing tendency towards extended mortgage terms beyond 25 years, both for first-time-buyers and those remortgaging into a higher interest rate environment.”

Demand for longer terms

Twenty7tec found that over 70% of all searches were for mortgages with terms over 25 years. And credit reference agency Experian said a quarter of homeowners under 30 have a repayment term of 35 years or more, an increase of 150% since 2020.

Broker Mojo Mortgages said that the average term length in 2021 was 28 years, and this was up to 29 years by 2023.

How a longer term helps

The longer your mortgage term, the smaller your monthly repayments. Borrowing the same amount over a longer term stretches your affordability, potentially reducing unaffordable monthly repayments to affordable ones.

According to data from Mojo Mortgages, the average first-time-buyer borrowed £189,693 last year at an interest rate of 5.27 over a term length of 29 years.

This would mean a monthly repayment of £1,064.80.

However, this would fall if they arranged the mortgage over a longer term. The same mortgage at the same rate over 40 years, for example, would be £948.87 per month.

Pros and cons of a long mortgage term

  • The shorter the term, the less interest you’ll pay overall, said Uswitch, no matter what interest rate you’re able to get.
  • However, an additional 10 years of repaying interest will make a significant difference in what you pay overall.
  • Longer terms also increase the likelihood of repaying your mortgage into retirement.
  • If you take out the maximum term length, you have less wiggle room if you need to extend it down the line.
  • A longer term lowers your monthly repayments, which aids affordability, stretching your income to maybe afford a more costly property, or allowing you to buy one sooner.
  • If you are remortgaging, it could reduce your monthly outgoings, or potentially allow you to remortgage where rate hikes have impacted your affordability.

Related: Longer-term mortgages and high first-time buyer age set to eat into pensions