Mortgage Lending Trends Changing Forever
The types of mortgages available in the UK have changed, forever. Now, 8 out of 10 UK homeowner loans have terms exceeding 25 years.
Two decades ago, the longest repayment term was 25-years. According to a report published by Moneyfacts.co.uk, one in four UK mortgage lenders now offer repayment terms spread that exceed 40 years, and 8 out of 10 lenders offer maximum mortgage repayment terms that exceed the traditional 25 year limits.
Julia Harris, analysts at Moneyfacts.co.uk, said that consumers needed to give careful consideration to both the size of the mortgage and the repayment term.
Harris said: “A mortgage for most of us will represent the largest and longest financial commitment of our lives. For many years the standard term considered for a mortgage in the UK was 25 years, but as affordability becomes increasingly difficult for many of today’s first time buyers, a 25-year term is perhaps no longer considered sufficient.”
Ms. Harris stresses that many UK homeowner loan lenders have enticed the young to buy by extending the mortgage term and increasing the income multiples, which increase the amount consumers can borrow.
“It’s a frightening thought to think you could potentially be forking out for that hefty monthly mortgage payment from the moment you turn 18 until the day you retire at 70.”
Debt experts warn UK consumers that homeowner loans that exceed 40 years are dangerous.
A spokesperson for the debt charity Credit Action said: “People are left very susceptible to any sort of circumstantial change” if they agreed to long-term repayment periods.