Mortgage sign-ups for repayment plans exceeding 35 years hit record high
The percentage of first-time home buyers taking out mortgages that exceed 35 years has hit a record high during the cost-of-living crisis.
Twenty percent of buyers are stretching out their repayment plans in order to make their deals more affordable in the initial years of ownership.
But despite enjoying lower payments each month, those buyers will be forking out more cash in the long-term as they accrue more interest, This is Money reports.
Figures from UK Finance show that such plans – which were once rare – are seen as attractive on a landscape of higher interest rates.
The latest trend means that many people buying their first home are facing repayments until they are aged in the seventies.
Don’t miss…
First direct slashes mortgage rates by 0.45% in ‘good news’ for homeowners[LATEST]
‘Hidden’ home-buying cost warning as buyers spend extra £2,000 in first year[LATEST]
‘I’m a mortgage expert – low interest rates are not always the answer'[LATEST]
UK Finance’s head of analytics James Tatch said: “Rising interest rates and cost of living pressures, combined with high house prices, have meant that buyers are looking for ways to stretch their affordability.
“Against this backdrop, the proportion of first-time buyers who took out longer-term mortgages has crept up through 2023, although this trend looks to be moderating.”
UK Finance’s research has shown that the Bank of England raising interest rates from 0.1 percent in December 2021 to 5.25 percent now are already having an impact on the house-buying market.
And in December 2021, before the onslaught of rising interest rates, the proportion of buyers taking out 35-year-plus deals was only at nine percent.
Ros Altmann, a former pensions minister, says that the “dramatic increase in mortgage rates” – which is influenced by centralised decisions on interest rates – make it unsurprising that people are now turning to more years of repayments.
The Office for National Statistics (ONS) said this week that their latest figures showed that mortgage holders were suffering the highest rate of cost inflation. Their research puts that figure at 9.3 percent.
Previous ONS figures showed that the average price of a house in England was 8.4 times the average income for the year ending March 2022.
That means housing are only half as affordable as they were in 1999 when the average home could be bought for 4.4 times the country’s average income.
- Support fearless journalism
- Read The Daily Express online, advert free
- Get super-fast page loading
Source: Read Full Article