Mortgage Warning: The Hidden Dangers of 35-Year Loans
Homeowners with mortgages stretching beyond 35 years have been issued a warning about the potential risks to their income. According to a trade association, one in five new first-time buyers took out mortgage terms exceeding 35 years in the first quarter of this year.
Mortgage borrowers beware: the long-term implications of 35-year loans
The trend of longer-term mortgages is a clear indication of the ongoing affordability crunch, with costs and house prices remaining high relative to incomes. UK Finance, a trade association, reported that 21% of people taking their first step on the property ladder had home loans lasting more than 35 years.
The Consequences of Longer-Term Borrowing
The review by UK Finance highlighted that the proportion of borrowing at up to 40-year terms eased slightly in the first quarter, but remains far higher than in the past. This is the case for all types of borrowers, but most significantly amongst first-time buyers.
The long-term implications of 35-year mortgages
The increasing trend of longer-term borrowing has the potential for wider societal implications, albeit that these may not come home to roost until some years down the track. Eric Leenders, managing director of personal finance at UK Finance, warned that some households were in a better place financially, but we are not out of the woods yet.
Cost-of-Living Pressures Remain
Cost-of-living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some. If you are worried about your finances, your lender has help available - please contact them as soon as possible to discuss your options.
Seek help from your lender if you’re struggling with mortgage payments
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, noted that the fact that a few lenders are withdrawing some higher loan-to-value products may raise eyebrows, but we are not seeing a mass exit. However, should more deals be withdrawn at higher loan-to-values, it may come as disappointing news to those who have a limited deposit, such as first-time buyers.
The Importance of Affordable Housing
Affordable housing is very much in short supply. As the trend of longer-term mortgages continues, it is essential to address the underlying issues of affordability and ensure that housing remains accessible to all.
The importance of affordable housing
