Is a 35 Year Mortgage Term the New Normal?

Over the last few years, mortgage terms have quietly stretched out with people taking out longer mortgages. What used to be a standard 25 year mortgage is now the exception rather than the rule, with an increasing number of longer term mortgages.

Recent data shows:

• Over half of first-time buyers now take a mortgage term of 30 years or more. (government statistics).
• The average term for first time buyers has risen to around 32 years, in TSB’s stats.
• Around 1 in 5 new first time buyers are now stretching their mortgage to 35 years or more.

At the same time as the above, regulators and economists are openly warning mortgage customers about the risks of “marathon mortgages” that run into retirement.

So is a 35 year mortgage term the new normal – and is it a good idea for you?

This article walks you through the pros, cons and considerations we advise, so you can make a calm and well informed decision before you lock yourself into a longer term mortgage commitment.

What is a 35 year mortgage term?

A 35 year mortgage is simply a standard repayment mortgage where you spread the debt over 35 years instead of 25 or 30.

• Longer term = lower monthly payments

but also:

• Longer term = much more interest paid over the life of the borrowing.

For example, a £200,000 mortgage suggests that stretching from 25 to 35 years might cut monthly payments by around £150–£170, but add tens of thousands of pounds in extra interest over the full term. The numbers will of course vary by rate, lender and product, but the pattern remains consistent throughout: lower payments now, higher total cost later.

Why are more people choosing 35-year mortgages?

1. High house prices vs wages

House prices have risen far faster than wages over the last decade. For many first-time buyers, especially in London and the South East, the choice is:

• Take a longer term, or
• Don’t buy at all (or buy something much smaller / further away)

A longer term simply stretches the repayments to make the same loan “fit” within affordability rules and makes getting onto the property ladder possible in the first place.

2. Higher interest rates and stricter affordability

After years of ultra low rates, buyers have had to adjust to mortgage rates that still feel noticeably higher, even though the new landscape has been this way for a few years now. However, the feeling just still remains and we have written here before around people still waiting for the landscape to revert back, which sadly is just not the case with 1 or 2% mortgages no where in sight.

Lenders also stress-test your income at higher “what if” rates to make sure you could cope with future increases.

Extending the term can help you:

• Meet a lender’s affordability assessment
• Keep a safety buffer in your monthly budget
• Avoid over-stretching yourself during the early years

Of course, there is a strategic advantage to longer term mortgages, by giving yourself more disposable cash. How you use the money is of course critical in that scenario.

3. Cost of living and life stage pressures

Many buyers are juggling:

• Childcare costs
• Rising rents while they save
• Student loans and other debts

A 35 year term can give some breathing space while income grows over time.

4. Borrowing later in life

It’s not just first-time buyers that we are seeing 35 year mortgages from. Lending into retirement is growing and of course with an aging population, this is becoming more prevalent. More people are buying or remortgaging in their 40s, 50s and beyond. FCA and independent analysis show a sharp rise in borrowers whose mortgages now run into their 70s.

That can work well, with a smart retirement plan and exit route are realistic.

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The upside: when a 35 year term can help

For the right person, at the right time, a 35-year mortgage term can be a sensible tool.

Potential benefits:

• More manageable monthly payments
• A longer term spreads the cost, often shaving £100+ a month off repayments compared with a shorter term (depending on loan size and rate).
• Helps pass affordability checks
• If a shorter term fails the lender’s affordability calculator, a 35-year term might make the difference between being approved or declined.
• Cash-flow flexibility

Lower core payments can free up money for:

• Childcare
• Car finance or other commitments
• Building an emergency fund
• Overpaying the mortgage when you can

You can of course take the option to shorten in later, and where possible, maybe start with a 35 year mortgage if required or desired, then:

• Overpay regularly, or
• Reduce the term when you remortgage later, once income has grown

For some buyers, especially in high cost areas, choosing a longer term is the only realistic way to get on the ladder. The key is to treat it as a starting point, not a forever plan.

The downside: why “longer” doesn’t automatically mean “better”

This is where properly thought through advice matters, and you can understand the full picture. A 35-year term can help you today… but it absolutely isn’t free money.

1. You Pay much more in total interest

Stretching a mortgage from 25 to 35 years can increase the total interest by tens of thousands of pounds over the life of the loan, even if the rate is the same.

That’s money you could otherwise put towards:

• Retirement savings
• Investments
• Overpayments to clear the mortgage sooner

2. Slower equity build up

With a longer term, more of your early payments go towards interest, not reducing the balance. That means:

• You build equity in your property at a slower rate
• You may have less flexibility to remortgage or move if prices fall or stay flat
• It can take longer to reach lower loan-to-value (LTV) bands where better rates are often available

3. Risk of paying the mortgage in retirement

Regulators and the Bank of England have both raised concerns about a growing number of borrowers whose mortgages run well into retirement. As discussed in Mortgage Solutions, if your term runs into your late 60s or 70s, you’ll need to be confident that:

• Your pension income is strong enough to support repayments
• You are comfortable potentially downsizing or using equity release later
• You are not compromising your ability to save for retirement now

4. Less flexibility if life goes wrong

A longer term can feel comfortable at the start, but if:

1. Interest rates rise again
2. Your income drops
3. Your health changes

…you might find you have less room for manoeuvre because there is still a lot of debt outstanding later in life and less equity to operate with within your property.

35 years vs 40 years: how far is too far?

You will often see lenders offering 35 and 40 year terms side by side and the reality is the monthly difference between 35 and 40 years is often relatively small.  However, the interest over those extra five years can be even more significant, so really a 40 year old mortgage should be avoided if possible. It just shaves a small extra amount off the monthly payment now, and probably isn’t wise unless absolutely necessary.

A broker will typically run the numbers so you can see:

• Monthly payment at 25, 30, 35 and 40 years
• Total interest paid in each scenario, for the longevity of the loan
• The impact of even small overpayments on each term

What about interest only over 35 years?

If you are considering an interest-only mortgage, the “term” works totally differently. On a pure interest only loan, the monthly cost doesn’t change if you extend the term from (say) 5 to 35 years, as you are only paying the interest amount.

The key question becomes:

What is your realistic, evidenced plan for repaying the capital at the end and I why do you want to take an interest only mortgage. They are more specialist and lenders will want to see evidence of:

• A credible repayment strategy and exit (sale of property, investments, bonuses etc)
• That the plan is on track and fits their criteria
• Strong affordability and a clear risk profile

If you are thinking about an interest-only term of 30–35 years, you should be speaking to an adviser who regularly arranges these types of mortgages and can explain the risks thoroughly. Mortgage advisers understand the commercial benefits, but can provide a very balanced and educated view on the complete picture.

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Can you change your mortgage term later?

Yes, you usually can change your term later, but nothing is guaranteed and it’s subject to each lender’s criteria at the time in which you chose to change anything.

There are common methods used to shorten the term of the mortgage:

Overpayments where possible: Many lenders allow 10% overpayments per year on fixed rate deals without penalties. Regular overpayments can cut years off your term and save a lot of interest.

Term change with your existing lender: Some lenders will let you formally reduce your term (after an affordability check) without a full remortgage. They will want to be satisfied that the higher monthly payments are affordable.

Remortgaging to a shorter term
When your fixed rate or initial deal ends, you can:

• Search the market for a more suitable mortgage product, rate and term
• Reduce the term at the same time, if the repayments fit your budget

The important bit: never assume that “I’ll just shorten it later” is guaranteed. Build a realistic plan and budget from day one.

Read a full article here on whether you should overpay on your mortgage or reduce your term.

How to decide if a 35-year term is right for you

Taking the bigger picture into account, we advise our customers that you should:

1. Look past the monthly payment

Compare products and terms side by side, so you can see the following:

• Monthly payments for 25, 30, 35 (and maybe 40) years
• Total interest paid over the life of the loan for each option

2. Stress-test your budget

You can’t just consider today’s rate in isolation, you need to understand if your rates were to rise, could you still afford the mortgage? Along with all other normal costs, and potential uplifts in childcare, car, bills etc.

3. Think about your future income and life plans

Really, for any substantial financial position, the considerations are the same, and with a mortgage potentially being your largest debt of your lifetime, you really ought to think about:

• How stable is your job or business?
• Are you expecting promotions, pay rises or returning to work after childcare?
• Do you want to reduce hours or retire earlier?

If you know you will want to cut back in your 50s, building in overpayments or a shorter term from the start may make more sense than relying on working longer.

4. Factor in protection

For all mortgages, protection is critical. However, even more so if your mortgage is running into your 60s or 70s, think about what happens if your income stops due to illness, injury or death.

Products like life insurance, critical illness cover and income protection can help protect your home and your family if the worst happens. A good adviser will discuss this as part of the same conversation – not as an afterthought.

Why speak to a mortgage broker about 35-year terms?

It’s imperative to speak to a mortgage broker to understand the products available and the criteria that is attached to them. Mortgage lenders don’t all treat longer terms in the same way and the key aspects of each can vary widely on:

• Maximum age at the end of the term
• How they treat various incomes, overtime, bonus or self-employed income
• Overpayment allowances
• Whether they can lend into retirement, and on what evidence

A specialist mortgage broker can:

• Compare options from thousands of mortgage products
• The Mortgage Broker have 130+ Lenders and 25,000 Mortgage Rates
• Show you clear illustrations across different terms and criteria points
• Explain how overpayments or future remortgages could change your picture
• Help you avoid choices that feel easy now but create problems in later life

You get a personalised view, a bespoke solution and not a one-size-fits-all answer. A mortgage broker works for you, not any particular mortgage lender.

Next steps: check whether a 35-year term is right for you

If you are weighing up a 25, 30 or 35-year mortgage term, you don’t have to guess, speak to The Mortgage Broker today for free, no obligation advice.

Book a free mortgage term review

Your home may be repossessed if you do not keep up repayments on your mortgage.