Number of long-term mortgages dramatically drop despite remaining popular

Jessica Nangle

February 8, 2021

mortgage products drop

New industry data analysed by Quilter has revealed that there were just 27 mortgages with a term of 40 years or longer in 2020.

A Freedom of Information request to the Financial Conduct Authority (FCA) shows that from January to September 2020 there were 27 mortgages with a term of 40-years or longer compared to 2,400 in 2019 and 9,575 in 2018 for the same period.

Despite the drop in numbers, longer term mortgage remained popular in 2020 with 43% opting for a mortgage longer than 25 years, the traditional length of a mortgage term.

This is consistent with previous years, with 43% in 2019 and 41% in 2018 have mortgages over 25 years.

The dramatic drop in marathon mortgages is likely to be because there were fewer providers offering such terms and those that were didn’t offer the high LTV for that period, which is required by the younger buyers who tend to favour longer terms. 

Gemma Harle, managing director of Quilter Financial Planning: “In 2014, stricter affordability rules were put in place, which then made it harder for borrowers to prove that they could afford the mortgage that they wanted.

“However, since then lenders have allowed borrowers to extend the term of their mortgages, which in turn reduced the initial monthly payments and ultimately enabled them to pass affordability assessments.

“On the face of it a marathon mortgage can be a good way to get someone’s foot on the property ladder.

“However, what you might save in monthly payments you will pay for hand over fist in interest over the whole term.

“Borrowers who opt for lengthy mortgage terms can end up paying significantly more over the course of the mortgage despite lower monthly payments.

“It is understandable that the popularity of longer mortgage terms has boomed in recent years as house prices have continued to rise at a faster rate than wage growth.

“While there is nothing inherently wrong with a longer mortgage it is not something to be entered into lightly as the costs can be considerably more.

“However, if someone’s finances change there are a range of options such as asking your current lender to reduce your term and increase your monthly repayments or remortgage to another lender on a shorter term.

“Not all lenders are the same though so it is important to assess the small print to make sure something like this is possible.

“Similarly, depending on the product you may be able to make overpayments and pay off lump sums occasionally.

“A mortgage adviser can be critical in helping someone navigate these kinds of challenges. “

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