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New data shows stark increase in mortgage sales with 35+ year terms

Date: 16 August 2021

16 August 2021

New Freedom of Information (FOI) data from the FCA gathered by wealth manager, Quilter, reveals a sharp increase in the number of mortgage sales with a term of 35+ years at the beginning of 2021.

In March of this year, 25,112 mortgages were sold with a term of 35+ years, a 70% increase compared with 14,765 in March 2019. In March 2018 14,683 were sold. For three years prior, at no point did sales surpass 20,000.

Number of mortgage sales with 35+ year terms

The same FOI request revealed that March 2021 also saw the highest total number of mortgage sales for the past three years, likely due to the original stamp duty holiday deadline of 31 March.

Total mortgage sales

Charlotte Nixon, mortgage expert at Quilter commented:

“Over the past few years, we have seen an increase in the number of mortgages sold with terms of 35 years or higher. In March 2021, sales increased to the highest figure seen for the past three years.  Following an overall decrease in sales in the first few months of the pandemic, the government’s introduction of the stamp duty holiday caused a rush to the housing market to snap up deals. The savings made with the removal of stamp duty, as well as lockdown-driven ‘accidental’ savings, may have allowed buyers to purchase higher cost homes than they would have expected.

“Ultimately, this rush to buy has pushed house prices up significantly across the country and may have contributed to the upswing in buyers opting for longer term deals.

“For some borrowers, particularly first-time buyers, securing a mortgage with a 35+ year term could be the only way to afford a property due to the lower monthly repayments. However, it is important that the risks of such long mortgage terms are properly understood.

“One of the largest knock-on effects of securing a mortgage with a term of 35+ years is that the longer the mortgage term, the older you will be when making the final repayment. This means that people are likely to be borrowing beyond their retirement age. Whilst some mortgage providers allow this, paying a mortgage in retirement can have a major impact on standard of living with many people becoming unable to comfortably afford the repayments.

“Additionally, whilst a mortgage with a term of 35+ years can result in lower monthly repayments, you are likely to pay considerably more in interest over the course of your mortgage term.

“However, whilst there are risks to longer term mortgages, certain types of these products allow you to make overpayments. This can serve to make repayments past retirement age more manageable. Overpaying will also reduce the amount of interest paid over the term length.

“Seeing a mortgage adviser is very important if you are looking to commit to a 35+ year term. An adviser can help you find the best product for your unique financial circumstances and ensure a mortgage product has the flexibility to overpay without being penalised. Having this ability will allow you to pay more off your mortgage if you are in a position to do so and ultimately reduce your term.”

Megan Crookes

External Communications Executive