personal finance

Shock rise of the 40-year mortgage


People traditionally expect to be mortgage-free after 25 years, but more than half of home loans now offer a 40-year-term, says comparison site Moneyfacts. Homebuyers are stretching their repayment terms because monthly payments are cheaper, but experts warned the interest they pay as a result will skyrocket. Borrowing £200,000 over 25 years will cost around £897 a month and £69,169 in interest at a rate of 2.5 per cent.

The same mortgage over 40 years reduces the repayments to £659, but raises the total interest bill to £116,588 – an additional £47,419. 

The average age of a first-time buyer is now 31 and rising, according to Halifax, so there is a real prospect of people carrying mortgage debt into their 70s, and even 80s. 

Darren Cook of Moneyfacts said: “An extended mortgage term may go beyond pension age, so it is imperative borrowers consider their options and make provisions if their personal circumstances change.”

Sam Mitchell of estate agents Housesimple, said: “The danger with 40-year mortgage terms is that homeowners could still be paying well into retirement.” 

A spokesman for mortgage industry body UK Finance said: “Longerterm mortgages provide an affordable route to home ownership. 

“This demonstrates how providers are lending responsibly and making sure borrowers can afford their mortgages. Most products also allow early and increased repayments or overpayments.”



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