New research from the Bank of England has found that one in four mortgages will end when the mortgage holder retires, as more and more people extend the term of their mortgage in a bid to make repayments more affordable.
In response to this data, mortgage comparison website Uswitch has shared its own findings.
More than half (51%) of mortgage providers now opt for a mortgage with a term of 30 years or longer.
From 2021 to 2023, the average mortgage term for a starter has increased by 1 year, from 28 years to 29 years.
Refinancing has seen the largest increase in average term:
In 2021, the average mortgage term for refinancing was 21 years.
In 2023, the average mortgage term for refinancing will increase to 23 years, an increase of 2 years.
The average home now costs seven times the average person’s salary. This is considerably higher than the four to five times salary ceiling that many mortgage providers use as a guideline.
Uswitch mortgage expert Kellie Steed commented: “According to Zoopla’s house price index, the current average property value in Britain is £264,500, meaning someone on an average salary (£34,900) would need to borrow more than seven times their annual salary . to take out a mortgage large enough to buy it. The vast majority of lenders limit their lending well below this level, at around four to five times annual income.”
She adds: “It is therefore not surprising that many are resorting to ‘giant mortgage terms’ to push their affordability to the absolute maximum. But starters are not the only ones affected. There has been a less significant but certain increase in average mortgage durations across the board since the Bank of England base rate began rising in December 2021.”