A quarter of young homeowners who have a new mortgage have opted to pay it back over 35 years or more in an attempt to make monthly payments more affordable, according to Experian.
Analysis by the credit data company found that 25% of new homeowners aged 29 and under between January and March this year had opted for a repayment term of at least 35 years.
This compares with the historical typical level of about 10%, which Experian recorded in January 2020.
First-time buyers and movers are increasingly opting for “marathon” mortgages – with lenders offering terms of as long as 40 years on some deals – for lower monthly payments in an effort to bridge the gap between rising living costs and still-high asking prices.
“Our data suggests that people under 30 are looking to secure longer mortgage repayment terms to help keep monthly repayments down on their homes, and this could also be affecting property-buying among house hunters,” said James Jones, the head of consumer affairs at Experian.
Longer mortgage terms mean some people will be nearing retirement age, or even retired, before they finally pay off their loan. A standard mortgage used to run for 25 years.
“With high interest rates increasing the pressure on borrowers, young people may feel like they have been ‘locked in’,” said Jones. “So we’re encouraging people to consider ways that they might be able to secure better deals on their mortgage terms.”
Earlier this year, the trade body UK Finance said that a record 19% of all loans taken out by first-time buyers in March were terms of 35 years or longer, with more than half taking a loan of more than 30 years.
At the time it said that 8% of home movers were taking out mortgages for terms of 35 years or more.
This latest assessment reveals the highest proportion of 35-year mortgages since records began in 2005, and more than doubles the 9% rate in December 2021, when the Bank of England started raising interest rates from a low of 0.1%.
However, there are signs that soaring mortgage rates may have peaked.
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Last month, the Bank of England kept interest rates on hold for the first time in almost two years, at 5.25%, after official figures showed a surprise fall in inflation in August.
This has prompted lenders to cut their rates with the average new five-year fixed mortgage rate has fallen back below 6% for the first time since early July, according to Moneyfacts.
There are a growing number of “best-buy” five-year fixed-rate deals now available at below 5% – though in many cases these are restricted to buyers able to put up a large deposit, or come with large fees.
However, many brokers say a full-scale mortgage price war is under way as lenders jostle to attract customers, with more mortgage rate cuts expected this month.
