First-time buyers opting for longer mortgage terms
New research suggests that first-time buyers are increasingly opting for longer mortgage terms, which could prove to be more expensive in the long run.
The Government’s latest English Housing Survey reveals that more than half (52 per cent) of first-time buyers have taken out a mortgage of 30 to 40 years – suggesting that longer mortgage terms are becoming ‘the new norm’ for new homeowners.
Following the news, concerns have been raised that many first-time buyers are burdening themselves with additional costs – as although a longer mortgage term will enable a homeowner to manage lower monthly payments, they will ultimately pay more interest spread out over a longer period.
A report in The Telegraph suggests that, in comparison with a standard 25 year mortgage, the total extra cost of a 30 year loan on a £300,000 property could be anywhere up to £22,976.
Dan Wilson Craw, Director of campaign group Generation Rent, said: “These figures reveal that the majority can now only access home ownership by taking out a longer mortgage.
“If renting provided affordable long-term homes, fewer people would feel so desperate to escape that they’d take on 30 or more years of debt in order to buy,” he said.
“The Government urgently needs to reform private tenancies to give more stability to renters’ lives.”
Daniel Hegarty, Founder and CEO of online mortgage provider Habito, added: “We are seeing a lot of movement towards 30-plus year mortgages. Over the long-term, borrowers would be very wise to try to pay off the mortgage faster than the term.”