Leap in borrowers taking out longer mortgage terms

Paula John
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Paula John

The proportion of customers taking out mortgages with a repayment term of more than 25 years increased from 16% to 32% in the third quarter of this year.

Younger borrowers are more likely to take a longer term which in part is down to more stringent criteria for loans reaching into retirement.

Those aged 30 or less account for nearly 60% of mortgages with a loan term of more than 25 years. Three quarters of those are for more than 30 years.

Among those aged 31 to 40, 79% had a mortgage with a term of up to 25 years while 16% had a mortgage term of between 25 and 30 years. Just 5% had a term of between 30 and 35 years.

Of the borrowers surveyed who were aged between 41 to 50, 98% had a term of up to 25 years, and 70% had a term of less than 20 years.

Bernard Clarke, CML, said: “The length of mortgage terms has been edging up over a number of years, partly in response to the growth in property prices relative to incomes. But older borrowers are far less likely to take out a mortgage with a longer term.

“Many older borrowers may already have been homeowners for some time and have therefore built up equity, allowing them to borrow what they need over a shorter term.”