The latest reports are revealing that 30-year mortgages are gradually becoming more common among all those who are buying property in the UK. The results are in for the second quarter in 2014 and they reveal that around 171,000 loans were granted during that period of time. Of these, approximately 20% of them were taken out over a period of 30 years or more. This compares to around 18% of loans taken out during the first quarter in 2013. Telling figures from 2005-2014
The figures are even more revealing when assessed for the second quarter of each year since 2005. Back then only a little over 5% of new mortgages were granted over this period of time. The figures change depending on which specific mortgage holders you look at. For example there has been little change in the figures for those re-mortgaging their homes. With that said however, the trend is still increasing compared to the situation back in Q2 2005. In contrast the biggest change has perhaps predictably occurred for those who are first time buyers. Back in the second quarter in 2005 around 7% of mortgages taken out by first time buyers were for 30 years or more. Now that figure has soared to well over 25% of first time buyers. Are mortgages with longer terms set to become the norm? While 25-year mortgages are still the traditional path taken by the majority, the stats cannot lie. Overall 30-year terms or longer have become more prevalent in recent years. One key factor that has played a significant role in recent times is rising house prices. Since many people are struggling to get together enough cash for a deposit, this means it becomes more attractive to seek out terms of 30-years or more instead of opting for the usual 25-year term. Of course this can increase the odds of running into problems if the mortgage holder should fall behind with their mortgage payments. The total amount repaid on a mortgage, even if it is only five years longer than the traditional 25-year stretch, can be significantly higher. Some experts have mentioned that the advent of the new mortgage rules have led to a desire for longer mortgage terms. People are desperate to own their own homes and if that means having a mortgage for five additional years (or longer, in some cases) this is what they will do. The main thing to remember is whether a longer mortgage term will suit the individual, rather than looking at the figures as a whole. Certainly longer terms are becoming more common but this does not mean they will be right for everyone. If your mortgage term means you will be paying the monthly mortgage until you are 70, this means you will essentially need to keep working until you reach that age. Clearly there is a lot more to think about here than might at first meet the eye. People have to look further into the future when it comes to choosing the appropriate length of mortgage term.