The share of first-time buyers taking out a mortgage lasting longer than 35 years more than doubled in a year, according to UK Finance figures reported by Which? on 27 April 2023. In February 2023, 18% of first-time buyers took out an ultra long-term loan, compared with 8% in February 20221.
Longer terms also became more common among buyers borrowing for 30 to 35 years, where the share rose from 34% to 38% over the same period. Among home movers, the share taking a term longer than 35 years rose from 3% to 8%1.
Which? reported that the average first-time buyer is now aged 31, and that high house prices have pushed the average first-time buyer deposit to £62,0001. It said a 40-year term taken at that age would mean repayments continuing into the borrower's 70s1.
The cost difference between terms is set out in an illustration based on a £180,000 repayment mortgage at an interest rate of 4%1:
| Mortgage term | Monthly repayment | Total interest | Total repaid |
|---|---|---|---|
| 15 years | £1,331 | £59,658 | £239,658 |
| 20 years | £1,090 | £81,783 | £261,783 |
| 25 years | £950 | £105,031 | £285,031 |
| 30 years | £859 | £129,365 | £309,365 |
| 35 years | £797 | £154,737 | £334,737 |
| 40 years | £752 | £181,098 | £361,098 |
On that example, a 40-year term carries a monthly repayment £198 lower than a 25-year term, but £76,067 more in total interest1.
"18% of first-time buyers took out an ultra long-term loan in February 2023, compared with just 8% in February 2022"
Why it matters for households
A longer mortgage term lowers the monthly repayment but increases the total interest paid over the life of the loan, as the table above shows. For a first-time buyer aged 31, a 40-year term runs into their early 70s, so the loan would still be outstanding around retirement age1.
Which? noted that a longer term slows the build-up of equity, because early repayments are weighted more towards interest, and that falling house prices raise the risk of negative equity in that position1. It also said a longer term can make the difference between an application being accepted and being rejected for buyers stretched by deposit and cost of living pressures1.
The figures cover first-time buyers and home movers in the UK. Anyone comparing what they could borrow against different terms can see how lenders assess affordability in our guide to how much you can borrow for a mortgage, and what is different about a first purchase in first-time buyer mortgages.
What happens next
No further UK Finance data on ultra long-term lending beyond the February 2023 figures has been reported here. Which? noted that most lenders allow overpayments of up to 10% of the outstanding balance each year, on a monthly or ad hoc basis, which shortens the term and reduces the interest bill where a borrower can afford it1. It also said borrowers considering a long term may want a loan without early repayment penalties, and that a whole-of-market broker can model how different terms affect repayments and total interest1.
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