According to Abbey only one in every four taking out a mortgage loan would now agree to a mortgage lasting 25 years or more, even though they are being actively encouraged. Over half state that they would definitely not take one out and another 23 per cent are unsure of the implications this would have in years to come.
The lock in period is the biggest turn off as well as the fact that many can scarcely imagine that far into the future as far as their lifestyle and finances go. The average first-time buyer taking out such a mortgage today would be fast approaching retirement by the time they had paid off their initial loan amount, let alone the outstanding interest accrued over this extended period.
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Encouragingly though, a quarter of Brits would abstain from borrowing over such a long period because they plan to pay their mortgage off within 25 years.
Fixed rate mortgages have surged in popularity over the past twelve months due to interest rate volatility and most homeowners agree that their main reason for opting for one is to keep their monthly payments the same regardless.
Sue Hayes, Director of Abbey Mortgages isnt so sure that pushing these mortgages will do any good: It is clear that the public dont have much of an appetite for 25-year mortgages. This is borne out by Abbeys own experience – we have launched 25-year mortgage products in the past, all of which had limited demand.
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We continue to see increasingly strong demand for our five and 10 year fixed deals, indicating that 25 years is just a step too far. Given the great cultural and economic changes weve seen in the past 25 years, this is not surprising. Few people are prepared to commit themselves to a deal for a quarter of a century.
The hassle of remortgaging coupled with the issue of punishing interest rates are definitely factors swaying more people towards the idea of a 25-year fix, however it is imperative to seek independent financial advice before making such a decision.
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