Nearly one in three (31 per cent) online searches for a new purchase mortgage between April and June involved a borrower seeking a deal at 90 per cent loan-to-value or above.
And one in five searches for a new purchase mortgage specified a term of 30 years or longer, according to the latest Mortgage Search Tracker.
The tool from UK broker Mortgage Advice Bureau (MAB) used data from over 250,000 monthly searches for mortgage products on comparison and broker websites to come up with the figures.
Spreading the cost of the average purchase loan sought – £147,814 – over a 30- or 35-year term can reduce monthly payments by £100 or more compared with the typical 25-year term, depending on the interest rate.
But it also pushes up the total cost over the lifetime of the loan, potentially adding tens of thousands to the total amount a borrower repays.
Affordability rules also mean lenders have to consider post-retirement income before agreeing to a mortgage term that extends beyond the borrower’s typical retirement date.
Lenders are increasingly specifying maximum age limits for mortgages. Over the last three months the average end-of-term upper age limit was 72, suggesting some older consumers hoping for an extended mortgage term may be out of luck.
MAB head of lending Brian Murphy said it paid for borrowers to seek advice about the most suitable option.
“Longer mortgage terms can lessen the impact of rising prices on affordability, but one question you need to ask is whether the short-term gain of lower payments is worth the long-term pain of a bigger total bill.”
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