Of Special Interest


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19th April 2019

Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander

As longer-term mortgages become more common, new research from Santander Mortgages shows that nearly half of buyers would consider taking a 40-year mortgage to get onto the property ladder. Analysis of data by the bank shows that buyers could save £178,500, 77 per cent of the average UK house price, by buying a property rather than renting over 40 years.

The bank’s findings show that a 40-year mortgage could help 3.25 million more first-time buyers get onto the property ladder. These are people who would otherwise not be able to afford the monthly repayments associated with a 25-year mortgage based on their salaries and living costs. The cost of an average monthly repayment for a 25-year mortgage falls by £263 when spread over 40 years.

However, 23 per cent of buyers didn’t realise that spreading a mortgage over a longer term would mean lower monthly repayments. Many people would look to reduce the term of a 40-year mortgage later down the line, 23 per cent would look to re-mortgage to a shorter term if their finances improved, 37 per cent would pay extra whenever they could to reduce the length and 18 per cent would look to re-mortgage to a shorter term when they moved to a different house.

When considering budgeting for monthly mortgage repayments, 52 per cent of prospective buyers would still want to maintain a certain quality of life, while 39 per cent must factor in other monthly financial commitments such as their car finance. Saving for major life events is also a consideration for a third of potential buyers, while 28 per cent need to consider saving to cover the costs of having children.

Santander’s research estimates that around 15 million people are looking to purchase a property in the next five years, with data suggesting that first-time buyers are responsible for over half of all property transactions.

Regional data analysed by Santander estimates that taking a mortgage over a longer term would have the biggest impact in the East of England, where 25 per cent more people looking to buy could afford to get onto the property ladder by taking a 40-year instead of a 25-year mortgage.

It’s estimated that 20 per cent more people living in the South-East looking to buy in the next five years would be able to afford monthly mortgage repayments when they are spread over 40-years. The same can be seen in London where longer-term mortgages could help another 20 per cent of people take a step towards owning their own property. Taking a mortgage over a longer term would also help over half a million people in the Midlands get a foot on the property ladder.