Nearly 830,000 mortgage holders could be paying off their home loans in older age and into retirement against a backdrop of record high house prices, i can reveal.
In 2005, the average length of a mortgage term for a first-time buyer was 25.8 years. By 2022, it had risen to 30 years. Lengthening the term of a mortgage is one way to make the loan more affordable.
New data from the mortgage trade association UK Finance, and shared with i, shows that 826,046 mortgages running for 30 years or longer have been taken out since January 2020 alone.
Of that total figure, 410, 994 mortgages belonged to first-time buyers with loans running for between 30 and 35 years. 108, 568 belonged to first-time buyers with loans running for 35 years or more.
257, 252 mortgages running for between 30 and 35 years belonged to movers, and 49, 323 lasting for 35 years or more belonged to movers.
The figures come after historic house price inflation during the pandemic and rising interest rates.
A UK Finance spokesperson told i that while the proportion of longer-term mortgages among first-time buyers has been rising since 2010 it “accelerated rapidly last year.”
“This is due to rising interest rates and cost of living pressures, combined with still-rising house prices leading buyers to look for ways to stretch their affordability,” they added.
The majority of these longer mortgages belong to first-time buyers and 19 per cent of all new first-time buyer mortgages have a term of 35 years or longer.
In recent years, the average age of first-time buyers has increased – it is now aged 30 or above in every part of the country, according to the lender Halifax.
The actual number of people paying into their retirement could be far higher because the UK Finance figures are based on the number of mortgages, but two or more people could be on the loan.
Expert housing market analyst Neal Hudson told i that this shift towards longer mortgages could mean that “people are paying more interest for longer and spending more on housing costs in older age when they could be saving.”
He also warned that longer mortgages could become “embedded in the market” if they are the only way to help buyers meet high house prices.
Mr Hudson added that this could be a “drag” on Britain’s economy in years to come because homeowners will have less “disposable income”, due to mortgage repayments.
“Given the state of pensions for young people it’s possible that we’re going to see people having to delay retirement in order to finish paying off their mortgages,” Mr Hudson concluded.
Naph Torrance, 35, a father-of-three and strategy director from London, told i that he has just taken out a 34-year mortgage with his wife, a psychotherapist, to buy a family home in the capital for just over £1,000,000.
“I’ll be repaying it until I’m 70,” he said over the phone. “That makes me feel nervous and I’m worried about what happens if house prices plateau or drop, but I’m putting it out of my mind because I’ve got three kids – we need a family home and [lengthening the mortgage term] is the only way we can make it affordable.”
Mr Torrance has secured an interest rate of 4.26 per cent and his monthly repayments will cost just over £2,500.
“I think there needs to be a mindset shift when it comes to homeownership,” Mr Torrance told i. “For our parents’ generation, property was seen as the ultimate investment but now it’s about finding somewhere you’re happy living in for decades and not necessarily expecting the value to go up.”
“We’re taking on a massive financial commitment for the rest of our lives for an asset that we may not fully own at the end,” Mr Torrance added. “And yet, I’m aware that we’re some of the lucky ones, actually able to get on the property ladder and have a place that is ours.”
Similarly, 38-year-old Andrew, who is also a father-of-three and works as an IT consultant from Oxfordshire, has taken out a 40-year mortgage to buy a £600,000 family home in Dorset, south-west England.
Andrew’s interest rate will be 4.65 per cent and his monthly repayments will cost roughly £2,500.
“It’s the only practical way of making the numbers word,” he told i. “I’m going to be paying this mortgage off until I’m nearly 80. I’m not happy about it but it’s better than renting. My family has been evicted through no fault of our own three times and I can’t tell you how desperate I am to not be terrified of losing my home.”
Long mortgage is ‘very daunting’
After separating from her partner, with whom she owned a home, 31-year-old Elizabeth Stepney has taken out a 35-year mortgage on a flat in north London with an interest rate of 4.9 per cent. Her monthly repayments are around £1,600 per month.
“I doubt I’ll be repaying this when I’m 66 because I will have moved on,” she told i. “I see this as a temporary house and it’s cheaper than renting in this part of London.
“But having such a long mortgage as someone who has bought on their own is very daunting. It’s a high interest rate and every time I log on to my online banking, I am struck by the fact that I have these huge amounts of money to pay off.”
“I know more and more single women – particularly those who have gone through break-ups – are having to take out big mortgages on their own to avoid going back to renting or house shares,” Ms Stepney added. “Home ownership was always seen as an investment but now it’s about finding a nice home to live in and avoiding horrible landlords.”
