Both remortgagers and those buying homes are increasingly opting for extended terms of 35 or 40 years – well beyond the standard 25 years – as they attempt to manage their repayments amid the cost-of-living crisis.
This is because the longer your mortgage term is, the smaller your repayments will be. Whilst this does increase the total interest you will pay over time, it offers affordability benefits which can be very attractive.
The analysis by Uswitch found demand for the so-called ‘mammoth mortgage terms’ of 40 years or more increased by 16% in 2023 whilst 86% of mortgages available have the option of terms up to 40 years.
It found this pattern of rising mortgage terms had been observed by several sources – from mortgage broker, Mojo, which reported a rise in those selecting terms of more than 25 years, to credit reporting business Experian and mortgage tech firm Twenty7Tech.
Kellie Steed, Uswitch mortgage expert, said: “As we enter another year of economic uncertainty in the UK, it seems that the ‘average’ 25 year mortgage term is increasingly becoming a thing of the past.
“The last year has seen a plethora of news reports on the growing tendency towards extended mortgage terms beyond 25 years, both for first-time-buyers, and those remortgaging into a higher interest rate environment.”
Steed said, since 2021, a significant number of lenders had increased the length of their maximum terms, as well as their maximum borrowing ages.
Moneyfacts data showed 86% of the mortgages currently available had the option of terms spanning up to 40 years.
“This is sometimes conditional, based on age at application,” she said, “so it won’t necessarily be possible to get a 40 year mortgage at age 55, for example.
“However, there is a very clear recognition from lenders that flexibility is needed in order to facilitate affordability for the average mortgage borrower in 2024.
Through specialist lenders, it’s also possible to get mortgages that stretch beyond 40 years, with some offering terms as long as 45 and even 50 years.”
Pros and cons of extending your mortgage term
The main advantage of an extended in term is that it will increase affordability. By stretching your income across a greater time period, you may be able to afford a more costly property or you may be able to buy sooner.
Steed explained, for those remortgaging, it could reduce your monthly outgoings, or potentially allow you to remortgage where rate hikes have impacted your affordability
But there are also some downsides to consider, the most obvious one being that the longer the term of the mortgage, the more interest you will pay. You are also increasing your equity more slowly, which could increase the risk of falling into negative equity.
What’s more, warned Steed, longer terms increase the likelihood of repaying your mortgage into retirement.
Should I extend my term and what are the alternatives?
If you are considering extending your mortgage term, or taking out a deal with a term which is longer than the standard 25 years, it could be a good idea to speak to a broker.
Steed said: “They’ll be able to assess your individual circumstances and recommend your best way forward, whether you decide it’s best to wait or not.”
If extending your term isn’t suitable for you and your needs, or you are worried about the ‘cons’ listed above, there are other options for improving affordability.
Joint mortgages is one solution – Steed said some lenders would consider the income of up to four applicants on one mortgage. “This could be useful in a house share, or buy-to-let partnership scenario,” she said.
Check out government schemes such as shared ownership, deposit unlock and rent to buy. Or consider guarantor, family assisted or JBSP (joint borrower sole proprietor) mortgages. You can find out more about these here.
