Being able to get a mortgage and buy your own home is becoming an increasingly distant dream for many people. With high house prices and interest rates on mortgages remaining upwards of five per cent, even those on above-average salaries are struggling to get a foot on the housing ladder.
This has caused a wave of people to start signing on to long term 30-year mortgages in order to meet banks’ affordability criteria. Since 2021, this has caused a 10 per cent increase in borrowers signing on to these long-term deals – meaning that the majority of homebuyers are now locked into 30-year terms.
Research carried out by Uswitch and Mojo Mortgages showed that the average term for a UK mortgage is now at a high of 29 years. This increase in term length has happened across the board, with remortgagers now facing 23 years to repay, rather than the pre-pandemic average of 21 years.
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While wages have increased in the past year to reflect the high cost of living, they still have not caught up with the rate at which house prices are going up, leaving many people unable to afford their first home.
Kellie Steed, the mortgage expert at Uswitch said: “According to the Zoopla house price index, the current average property value in the UK is £264,500, which means someone on an average salary (£34,900) would need to borrow more than 7 times their annual salary to take out a large enough mortgage to buy it. The vast majority of lenders cap their lending way below this, at around 4-5 times annual income.
“It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum. However, first-time buyers are not the only ones affected. There has been a less significant, but certain increase in average mortgage term lengths across the board since the Bank of England base rate began to rise in December 2021.”
