Young people in the UK increasingly taking on longer mortgages
Young people in the UK are increasingly looking to spread the cost of buying a home in a bid to lower their monthly spend on their mortgage, it has been revealed. But by doing so, buyers have been warned they are spending more in total.
According to new figures published this week by broker L&C Mortgages, the number of young people who are moving away from the traditional 25-year mortgage product is on the rise. It said that the volume of buyers taking on a 31 to 35-year mortgage is now double what it was as recently as a decade ago.
The reasons for doing this are simple. Having a house purchase loan spread over a longer period means that buyers are having to spend less on a monthly basis, allowing them more money for other things.
However, it's also worth noting that spreading the cost over a longer period means more interest being charged over the duration of the loan. This means that, in fact, it is more expensive overall to obtain a longer mortgage than a traditional product.
L&C Mortgages warned that some buyers could risk spending tens of thousands of pounds more by borrowing in this way.
A more detailed look at the data shows that the number of first-time buyers in the UK property market who are taking on a 25-year mortgage has fallen from 59 per cent in 2007 to just 39 per cent in 2017.
At the same time, the proportion who are opting for a 31 to 35-year mortgage has risen from 11 per cent in 2007 to 22 per cent this year.
David Hollingworth, of L&C Mortgages, said the reason many people choose to buy in this way is simply because they "needed some slack in the monthly budget". However, he also advised that "ideally, if you keep the term shorter, it will save you money in the long run".
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11-October-17General Lettings News