Increase in individuals aged 36 and above opting for 35-year home mortgages skyrockets by 251%
Longer Mortgage Terms on the Rise in the UK
In a surprising turn of events, 2020 saw a significant increase in the number of 35-year mortgages sold, marking a 251% rise compared to 2019. This trend has continued, with the number of people over 36 taking out these long-term mortgages surging by 251% in just five years.
The mortgage term is now more often 30 years or more, a shift from the common 25-year term in the past. This trend towards longer mortgage terms among older borrowers suggests deeper structural issues, such as delayed homeownership, limited housing supply, and the growing gap between income and housing costs.
While extending the mortgage term may provide short-term relief by reducing monthly payments, it comes with long-term financial implications. By lengthening the term of a mortgage, a borrower spreads their repayments over a longer period of time, reducing monthly costs. However, this means paying interest for a longer period of time and ultimately paying more in the long run.
A 35-year mortgage on a given principal can end up costing hundreds of thousands more in interest than a 25-year mortgage, due to the longer repayment period and accruing interest over more years. Borrowers taking 35-year terms are often older, which implies mortgage payments may continue well into retirement. This can increase financial strain long term and complicate retirement planning.
There are potential challenges with early repayment, as fixed-rate mortgages common in long terms may include penalties if you move house or repay early, limiting flexibility and potentially increasing costs if circumstances change.
Consulting with a mortgage adviser can help tailor the term to individual circumstances. Zara Bray, mortgage expert at Quilter, states that extending mortgage terms may ease short-term financial pressure but underscores the need for broader reforms to improve housing affordability.
Remortgaging to a better deal when interest rates fall or your loan-to-value improves can lower monthly repayments or allow you to switch to a shorter term. For those approaching retirement, it's worth exploring whether downsizing or using pension drawdown strategies could help manage repayments more sustainably.
The Financial Conduct Authority data supports this trend, with the number of borrowers aged 31-35 taking out 35-year mortgages increasing by 56% over the past five years. In 2024, 30,338 mortgages with a term of 35 years or more were taken out by those aged over 36.
In summary, a 35-year mortgage can make monthly payments more manageable but at the expense of paying significantly more interest overall and carrying debt longer, possibly into retirement. Borrowers should carefully weigh these trade-offs against their financial stability, future income prospects, and plans to move or pay off the mortgage early. Consulting with a mortgage adviser can help tailor the term to individual circumstances.
- The rise in 35-year mortgages implies that more people are investing in property, with longer mortgage terms now standard in finance, yet this decision may lead to personal-finance challenges in the future due to paying more interest over a longer period and potentially continuing mortgage payments into retirement.
- Delayed homeownership, limited housing supply, and a growing income versus housing cost gap are contributing factors to the increase in 35-year mortgages among older borrowers, signifying deeper structural issues in the real-estate industry.
- Although extending mortgage terms reduces short-term financial stress by reducing monthly payments, it's crucial to consider the long-term implications, as this strategy means paying more in interest and possibly complicating retirement planning due to potentially extended mortgage obligations.
