There has been a ‘concerning spike’ in the number of over-40s taking out mortgages with a term of 35 years, according to Quilter.

The wealth manager said this is a worry because it means the mortgage is likely to stretch into their retirement years.

It gathered the data through a Freedom of Information (FOI) request from the regulator. In the first two months of this year, 478 mortgages with a term of 35 years or more were sold to people aged over 40.

More worryingly, projections show this figure is likely to grow to more than 3,039 sales of this kind throughout 2022 – a 39% increase on 2021, and a staggering 433% increase on 2020 when just 570 were sold.

Why are over-40s taking longer homeloans?

Quilter said that rising house prices are the main reason. Many over-40s have extended their mortgage term to make sure they can afford the monthly repayments, particularly with the current cost of living crisis.

But those taking out a mortgage for 35 years or more from the age of 41 will be at least 76 when it is fully repaid, so there is a ‘real risk’ their monthly repayments will have a ‘detrimental effect on their quality of life in retirement’, it said.

Quilter addded that, with interest rates predicted to hit close to 6%, those committing to long mortgages in the near future will be paying some of the highest interest rates seen for well over a decade.

Assuming someone age 41 had a mortgage of £250,000 with a 35-year term on an interest rate matching the current Bank of England base rate of 2.25%, they could expect to pay a £861 monthly repayment. If the interest rate rose to 6% as is currently predicted, they could expect to see their monthly repayments increase to £1,426.

They will need to be confident they can afford to make their repayments until the age of 76 – eight years after they can expect to qualify for the state pension, which is currently £185.15 a week.

Karen Noye, mortgage expert at Quilter said: “In recent years, we have seen a stark increase in the number of mortgages sold with terms of 35 years or higher. However, up until now this appeared to have been predominantly among younger first or second-time buyers. Since the pandemic, we have seen a steady increase in the number of over 40s taking out mortgages with longer terms and while this is not inherently wrong, it does have the potential to stretch people’s finances later in life.

“While the sales remain in the hundreds for now, as opposed to the thousands sold each month to people in younger age groups, the spike is concerning nonetheless. For those people considering entering into a mortgage that will see them well into retirement, it is vital they think ahead and are aware of the potential risks.”