Borrowers opting for 35 year mortgages
Demand for longer term mortgages Increases
The number of homeowners taking out longer term mortgages has doubled over the last 12 months. The main reason for this according to some experts is affordability. Buyers are no longer able to take out interest only mortgages so are instead opting to take out mortgages over 35 years in order to bring their monthly payments down to a more affordable level. Put simply many of these buyers would not be able to buy a home if they were forced to take the more traditional route if taking out a loan over 25 years. Unsurprisingly the longer term loans are most popular amongst borrowers under the age of 30 who are twice as likely to go down this route than all cot the other age groups put together.
Because house prices have increased so far it is harder for buyers to get on the housing ladder. Even with the current schemes being offered by the government borrowers have struggled to buy a home with the traditional 25 year mortgage terms. The difference in monthly payments is significant and is the only way many borrowers can afford to buy a home. Whilst the loan repayments are lower each month the amount of money repaid over the long term will be higher but this isn't putting buyers off.
It could be argued that 35 year mortgages could be the norm because house prices are not going to come down in the long term and will more than likely increase over the next couple of years particularly in London and across the south-east. There also seems to be more od a demand for fixed rate loans over much longer periods of time as borrowers look to fix there finances each month and avoid interest rate hikes. These schemes are more popular in America and could be introduced over here if there was the demand.