Desperate first-time buyers who take out longer loans to access the housing ladder
For a 30-year term, monthly repayments drop to £ 738, but the total bill will be £ 16,500 higher as more interest is incurred, according to the Money Advice Service analysis.
However, some long-term mortgages allow overpayments. “This can be used to make repayments after retirement age more manageable. The overpayment will also reduce the amount of interest paid over the term, ”Ms. Nixon said.
Soaring house prices have pushed affordability in the UK to an all-time high, further isolating first-time buyers who, for much of the past year, have been largely excluded from the mortgage market by risk-averse lenders.
Buyers now have to spend 8.5 times the average salary to afford a property, according to lender Halifax’s analysis.
Mark Hosker, mortgage broker Cyborg Finance, said: “We are seeing a lot more longer term mortgages, which reflects the new reality of home ownership.
Buying with a long-term mortgage also meets lender affordability tests, which have become increasingly stringent over the past decade.
Colin Bell of Perenna, a mortgage lender, said, “Going for a longer repayment period can mean paying thousands of additional interest over the life of the loan. This approach only covers the cracks of a larger problem in the UK mortgage market.
“We must not only improve the supply of housing in the UK to better control increases in house prices, but also change the way housing is financed.”
Perenna launches a 30-year fixed rate mortgage to lock in low rates. It would allow borrowers to change after five years at no additional cost. “These types of mortgages are common in other parts of the world and can be particularly useful for first-time home buyers,” said Mr. Bell.