23 Aug New FCA Data: 35 year mortgages at a high
According to released data in a recent FCA analysis, the number of mortgages sold with terms of 35 years or more, has increased by 70% in the last year.
Using Freedom of Information requests tracking the number of 35+ year mortgages sold, it is clear to see the steep increase in the popularity of these longer-term mortgages.
In March 2018, there were 14,683 mortgages arranged for a 35+ year term. In March 2019 the figure increased to 14,765 and then dropped slightly in March 2020 to 14,383.
However, in March 2021, the figure rose dramatically to 25,112.
The apparent surge in 35-year mortgage sales was in part driven by overall higher mortgage volumes in March, as buyers scrambled to beat the original stamp duty holiday that was due to cease at the end of that month.
A mortgage expert from Quilter said:
“Over the past few years, we have seen an increase in the number of mortgages sold with terms of 35 years or higher.
“In March 2021, sales increased to the highest figure seen for the past three years.
“Following an overall decrease in sales in the first few months of the pandemic, the government’s introduction of the stamp duty holiday caused a rush to the housing market to snap up deals.
“The savings made with the removal of stamp duty, as well as lockdown-driven ‘accidental’ savings, may have allowed buyers to purchase higher cost homes than they would have expected.
“For some borrowers, particularly first-time buyers, securing a mortgage with a 35+ year term could be the only way to afford a property due to the lower monthly repayments.
“However, it is important that the risks of such long mortgage terms are properly understood.
“One of the largest knock-on effects of securing a mortgage with a term of 35+ years is that the longer the mortgage term, the older you will be when making the final repayment.
“This means that people are likely to be borrowing beyond their retirement age.
“Whilst some mortgage providers allow this, paying a mortgage in retirement can have a major impact on standard of living with many people becoming unable to comfortably afford the repayments.
“Additionally, whilst a mortgage with a term of 35+ years can result in lower monthly repayments, you are likely to pay considerably more in interest over the course of your mortgage term.”
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