Huge increase in the number of borrowers taking out 35-year mortgages –

The number of borrowers taking out marathon mortgages has more than doubled in the past four years, with people making offers to lower monthly mortgage payments, according to data from Quilter.

Homeowners taking out a home loan with a term of 35 years or more hit a high of 88,059 in 2022, up from just 40,471 in 2018, a 117% increase, according to the investment firm.

He points out that while increasing the term of a home loan lowers monthly mortgage payments, it also means that the amount paid in total increases.

The data comes after the Bank of England raised the Bank Rate 13 times in a row since December 2021 to 5%.

The company points out that the number of people who will still be paying off their mortgage until the age of 70 has nearly quadrupled in the past four years.

In 2022, more than 12,000 people over the age of 41 took out a 30-35 year mortgage.

That compares to just 3,035 people over the age of 41 who took out this type of home loan in 2018.

The firm points out that assuming a 41-year-old has a £250,000 mortgage with a 35-year term on an interest rate of 3%, which is roughly the average of the past 20 years, they could expect to pay £962 in monthly repayments or £11,544 over the year.

He adds: “While this figure may rise and fall over the years depending on interest rate levels throughout the life of their mortgage, they will need to be confident that they can afford to make these large repayments until age 76 using their retirement wealth.”

Karen Noye, Quilter Mortgage Expert, says: “For many people, to achieve their dream of home ownership or simply to get an affordable mortgage, they have had to increase the term of their mortgage. While this isn’t inherently bad and can be a lifeline for people during this difficult time, it has the potential to stretch people’s finances later in life, especially for those in their 40s.

“For anyone considering taking out a mortgage that will provide them with a good retirement, it is essential that they think ahead and be aware of the potential risks. Many people undersave for retirement anyway without even considering the fact that they won’t earn anything and will have to pay mortgages and living expenses.

“Similarly, while a mortgage term of 35 years or more may result in lower monthly repayments, you’ll likely pay significantly more interest over the term of your mortgage.

But she points out: “Certain types of mortgage products allow you to overpay, which could help make repayments after retirement age more manageable. Overpaying can also help reduce the amount of interest paid by decreasing the overall length of the term.

Quilter’s figures come from new freedom of information data from the Financial Conduct Authority.