New Mortgage rules by FSAFirst-time buyers have been challenged in several ways in recent years. Rising house prices have led to larger deposits needing to be found in order to afford a property. With wages largely stagnant in recent years, this has led to problems being able to save enough to buy. While mortgage rates are at an all-time low, stricter affordability rules have made it harder still to get the home loan required to buy.

The good news is that longer mortgage terms have become easier to get hold of. While the traditional 25-year deal is still on the table, more and more first-time buyers are seeking deals that run for longer than this.

Survey sees significant rise in this area

A graph indicating the results of a Regulated Mortgage Survey showed just over 30% of borrowers took out mortgages lasting longer than 25 years back in 2006. Today, that figure has grown to just shy of 60%.

The same rise can also be seen in those who have moved home, as well as those who are re-mortgaging, although the percentage is lower in both these areas.

Longer terms are becoming more freely available on the High Street

The availability of mortgages over longer terms is also changing. It would have been very difficult to find a mortgage available over a period longer than 25 years at one point. However, today, big lenders including Nationwide and Halifax do offer such deals, so they are not hard to come by.

Higher repayments over the life of the term

The problem with such deals is that the longer repayment period leads to far higher repayments occurring over time. According to recent figures, opting for a 30-year repayment period makes the monthly payments £76 cheaper than they would be for a 25-year mortgage. However, it also means the borrower will pay back around £20,000 more than they would if they opted for a 25-year mortgage.

A 40-year term makes the repayments far higher. In this case, the extra payments to the bank or building society would amount to over £63,000. Indeed, in this case, a property purchased for £150,000 would lead to repayments of around double that to the lender once the mortgage is paid off.

Considering the pros and cons

Clearly, this should be borne in mind for anyone who wants to buy a property and pay for it over a longer period of time. It can be notoriously difficult to get on the housing ladder, especially in a period of high house prices and tough affordability rules. However, stretching the mortgage term means many people will be paying their mortgages long after they have retired – leading to potential issues with repaying their mortgages once they no longer have a regular income.

Suffice to say, there seems to be no let-up in the number of extended mortgage terms available. In reality, things are going the opposite way, with more of them becoming available all the time. The era of the extended mortgage term seems here to stay.

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