In a bid to make homeownership more accessible amidst rising costs, UK first-time buyers are increasingly opting for extended mortgage terms, as revealed by recent data from TSB.
In 2023, the United Kingdom witnessed a significant shift in the housing market, particularly among first-time buyers who are increasingly opting for longer mortgage terms to make homeownership more affordable. According to data from TSB, the average age of first-time homeowners has decreased to 31, down from 32 in the previous year. This trend towards extended mortgage terms is underscored by the fact that over half, specifically 57%, of first-time buyers co-purchased homes, thus participating in joint property ownership.
The length of mortgage terms for newcomers to the property ladder has seen an uptick, moving from an average of 30 years in 2021 to 32 years in 2023. Roland McCormack of TSB highlighted this growing preference among first-time buyers to secure extended repayment terms as a strategy to manage the increasingly difficult financial requirements for acquiring property. Similarly, Roland McCormack, TSB’s Mortgage Distribution Director, and David Postings, the chief executive of UK Finance, commented on the necessity of such financial arrangements amidst rising housing prices and mortgage rates.
The longer mortgage terms, often referred to as “marathon mortgages,” offer lower monthly repayments but come at the cost of higher interest payments over the lifespan of the mortgage. Critics argue against this financial strategy due to the long-term cost implications. The evolving housing market, marked by the introduction of up to 40-year mortgages by lenders like HSBC, reflects the challenges faced by younger prospective homeowners in the current economic landscape.
The data underscores the importance for lenders to rigorously assess borrowers’ affordability amidst the market’s transformations, ensuring buyers possess a clear understanding of their financial commitment when entering such significant long-term debts. As homeownership aspirations continue to drive market trends, the role of marathon mortgages in facilitating access to property for first-time buyers remains a notable aspect of the UK’s residential property sector.
