The rise of 40-year mortgages: lifeline or long-term trap?

With people living longer, healthier lives, the mortgage term is also creeping up. According to the latest research, the average mortgage term is now 32 years, with first time buyers in particular eager to extend terms to get on the property ladder so much faster. With this, 40-year mortgages are becoming common occurrences, but is an extended term a push too far or a much-needed lifeline for those finally able to make the transition from tenant to homeowner?

The age of the 40-year mortgage

The affordability of UK housing has long been a hot topic, and it’s leaving many people – from first time buyers to seasoned property purchasers – priced out of the market.

It’s the same story for so many; property values are outgrowing wages, with new and existing homeowners now left unable to stick to 25- or 30-year mortgage repayment schedules. By extending the term with a 40-year deal, monthly payments can be reduced to make homeownership accessible and affordable once more, even in the face of higher borrowing costs. There’s stronger demand than ever for 40-year mortgages as Which? describes:

“Despite costing significantly more in the long run, mortgages of more than 35 years in length are proving popular. Borrowers are increasingly spreading their mortgages over a longer period to make things more affordable in the short term. House-builder Taylor Wimpey says first-time buyer demand for 40-year mortgages has more than tripled since 2021. And for second-time buyers, 42% are taking out loans longer than 30 years, up from 28% in 2021.”

The benefits

The market is certainly making the prospect of a 40-year mortgage much more attractive. From lower monthly payments to improved affordability, 40-year products make perfect sense in today’s economy. Lower monthly repayments can free up cash to be used elsewhere, with more to put away for childcare, education, retirement, and life’s other little and big expenses.

The mortgage application process is made less stressful with a 40-year product too. With a lower monthly payment to foot the bill for, prospective property owners are more likely to pass stringent affordability checks. Extended maximum working ages are also making 40-year mortgages more viable choices, with borrowers up to the age of 35 now ideal candidates.

The drawbacks

There are of course downsides to 40-year mortgages, with the higher overall interest the most obvious disadvantage. Borrowers with 40-year terms will pay significantly more in interest over the life of the loan compared to shorter terms. While slower equity growth can also limit your options for future financial security, refinancing or selling.

Carrying debt into later life is another concern that deserves your consideration, with the 40-year term stretching well into those retirement years. Lower monthly repayments can leave you at risk of over-borrowing too, which can be difficult to manage in the long term.

Find the best deal for you

The 40-year mortgage isn’t for everyone. A fact that makes exploring all your options a must as you purchase your first or next property, or remortgage your current home. Thankfully, our experts are here to help with independent mortgage advice that’s made for you and your circumstances.

Contact us today for a free, no obligation chat, and become one step closer to a mortgage product that suits your needs now and long into the future.