"New UK homeowners increasingly opting for extended home loan periods in marathon-style mortgages"

First-Time Buyers Opt for Longer Mortgage Terms Amid Cost-of-Living Crisis

In the face of rising interest rates and the ongoing cost-of-living crisis, some first-time buyers in the UK are turning to extended mortgage repayment plans. Lenders are now offering terms as long as 40 years on certain deals, a significant shift from the norm.

According to data from Experian, a credit data company, 25% of new homeowners aged 29 and under between January and March 2023 chose a mortgage repayment term of at least 35 years. This is a marked increase from the 10% that opted for such long terms back in January 2020.

James Jones, head of consumer affairs at Experian, suggests that young people may be choosing longer mortgage terms to keep monthly repayments down. This could potentially impact the property market, as extended terms might affect the buying power of house hunters.

The average UK house price in September was around £14,500 lower than in the same month a year earlier, according to recent research from Nationwide. However, the current cost-of-living crisis has caused more people to seek longer mortgage repayment terms to manage their mortgage payments.

Nationwide's chief economist, Robert Gardner, stated that more buyers are looking towards smaller, less expensive properties. Transaction volumes for flats are holding up better than other property types, likely due to their relatively better affordability. Flats experienced less of a price increase over the pandemic period, according to Gardner.

High interest rates are putting pressure on borrowers, as noted by James Jones. Nationwide estimates that someone earning an average income, purchasing the typical first-time buyer home with a 20% deposit, would spend 38% of their take-home pay on their monthly mortgage payment.

It's worth noting that the current contract lengths for new customers older than 30 years offered by credit institutions typically range from a minimum of 12 or 24 months up to a maximum of 120 months (10 years).

James Jones encourages people to consider ways to secure better deals on their mortgage terms. As the cost-of-living crisis continues, it's crucial for first-time buyers to make informed decisions about their mortgage repayment terms to ensure they can comfortably meet their financial obligations.

"New UK homeowners increasingly opting for extended home loan periods in marathon-style mortgages"