Rise in demand for 40-year mortgage

40-year mortgage

Despite the recent market slowdown in the UK, there is increasing demand for 40-year mortgage

Despite the recent market slowdown bringing wages more in line with property prices, there is increasing demand for the mortgage market to offer more 40-year mortgage terms.

According to data from Santander Mortgages, around half of first-time buyers would consider a 40-year loan in order to reduce monthly repayments and make housing affordability stretch a bit further.

In 2018, 51% of all residential mortgages had a standard maximum mortgage term of 40-years, this has increased from 36% in 2013 which could mean that more people could begin to achieve home ownership through the increased mortgage length.

The report claims that extending the length of a loan to 40-years could enable 3.25 million access home ownership when they would be otherwise priced out of the property market, with an average monthly saving of £263.

Over the term of a 40-year mortgage, it is speculated that people that would have been trapped in private rent over this period, could save over £170,000 if they were able to make the jump from renting to buying through this extended means.

The report claims that although first-time buyers could exploit the longer mortgage term to gain a foothold on the property ladder, many prospective owners would change their mortgage terms when they are in a position to remortgage.

23% of respondents would look to remortgage to a shorter term, 18% would look for a shorter mortgage term when they second-step up the ladder and 37% would look to overpay on their mortgage whenever they could to reduce the term.

Managing director of Mortgages at Santander UK, Miguel Sard commented that the possibility of owning a property may seem like a distant dream to some aspiring buyers, many of whom have found themselves locked in a ‘rent trap’ and unable to get onto the property ladder. By offering buyers the option of a longer-term mortgage, their aim is to address some of the affordability restrictions they face and support them in buying a home with more manageable monthly repayments.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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