To reduce the cost of repayment mortgages, first time buyers are opting for longer terms of up to 40 years.

Many first time buyers are avoiding the traditional 25 year mortgage terms in faviour of longer terms of 30 or even 40 years in order to reduce the month cost of a prepayment mortgage.

Rising house prices in the UK makes it more difficult to afford buying a home. For a £200,000 property a 25 year term would cost £1,056 per month reducing to £955 per month with a longer 30 year term.

Selecting a 40 year term would reduce this figure to £836 per month but would also significantly increase the total amount to repay by £84,500.

Property market under stress

Economists see extended mortgage terms as the result of stress in the mortgage market and occurred in Ireland before the 2007 property boom where terms increased to 30 and 35 years.

While in Canada Mark Carney, the governor of the Bank of England, used measures to reduce the term of mortgages from 40 to 25 years to take steam out their property bubble.

With greater competition and reduced supply of suitability properties for home movers, more homeowners are remaining in their existing home and saving for a bigger deposit.

Measures to test affordability over a 25 year period only have not been adopted by the Financial Services Authority after pressure from banks allowing longer mortgage terms such as Santander with repayments over 35 years, Halifax and Nationwide over 40 years and HSBC over 30 years.

To justify the longer terms lenders have cited higher house prices and longer life expectancy although this is offset by first time buyers now being older when buying their first homes.

Older remortgage buyers are often forced by the lender to repay their loan at a certain age and rather than downsizing, they can agree a lifetime mortgage.

Rising house prices allows the equity release buyer to access money with a lifetime mortgage and use this to maintain your lifestyle or gift a child or grandchild the deposit on their first home.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage monthly cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements and holidays of a lifetime or even give to a family member.

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