30 year mortgage plans preferred by young UK homebuyers

Research has found one in four younger home buyers are opting for longer-term mortgages as affordable properties remain out of reach.

Research by Experian, a credit data company, has found that 25% of new homeowners aged 29 and under between January and March 2023 had chosen a repayment term of at least 35 years on their mortgage deal.

Some first-time buyers have also decided to choose a ‘marathon’ mortgage plan with lenders offering terms for as long as 40 years on some deals.

In January 2020 the same company recorded a mere 10% of people were opting for such a long repayment plan, but as the current cost-of-living crisis has forced interest rates to skyrocket and bills to soar, it comes as no surprise that people need more time to pay back their mortgage loan.

James Jones, head of consumer affairs at Experian, said: ‘Our data suggests that people under 30 are looking to secure longer mortgage repayment terms to help keep monthly repayments down on their homes, and this could also be affecting property-buying among house hunters.’

‘With high interest rates increasing the pressure on borrowers, young people may feel like they have been ‘locked in’, said James. ‘So we’re encouraging people to consider ways that they might be able to secure better deals on their mortgage terms.’

As well as high inflation rates impacting the cost of running a home, recent research from Nationwide has found the average UK house price of £257,808 in September was around £14,500 lower than in the same month a year earlier.

In addition, Nationwide said that someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take-home pay on their monthly mortgage payment. This is higher than the long-run average of 29%.

Robert Gardner, Nationwide’s chief economist, said: ‘There are signs that more buyers are looking towards smaller, less expensive properties, with transaction volumes for flats holding up better than other property types.

‘This may be because affordability for flats has held up relatively better as they experienced less of a price increase over the pandemic period.’

Image: Towfiqu barbhuiya