Two in five first-time buyers in the UK who bought in 2022 will be aged over 65 when their mortgage term ends, according to new data in the Financial Conduct Authority (FCA).
This means that some homeowners could expect to continue paying down their mortgage even after they hit retirement age.
The figures also reveal that the average mortgage term has increased overall, with 34% of all new mortgages now staying longer than 3 decades, in contrast to 20% in 2007.
Here, we glance at the impact of getting a longer-term mortgage and whether they might be a suitable option for you to secure your home.
The rise of mortgage terms
An increasing number of first-time buyers are choosing long-term mortgages (3 decades or even more), meaning that many will still be paying off your finance when they retire, based on findings within the FCA’s latest Sector Views report.
The results showed 40% of borrowers who took out a mortgage in 2022 will be aged over 65 before they repay their loan.
These buyers could be repaying their mortgage throughout their working life and into the first many years of their retirement, which could negatively impact their pensions and retirement savings.
A number of factors are driving the push towards longer-term mortgages, including subdued earnings growth, changing working patterns, increasing household debt and lower savings rates.
Higher housing costs, particularly in London and also the East, are causing buyers to rent for extended because they find it difficult to get to the housing ladder. When these buyers do finally secure a property, they tend to be older and have an increased possibility of borrowing into later life.
The chart below shows the typical age of borrowers when their mortgage reaches no more its term.
Maximum terms provided by mortgage lenders
Mortgages lasting 3 decades or even more have been readily available for quite a long time and their business has grown over the last decade.
Using data from Moneyfacts, we’ve identified all of the major lenders offering 35-year and 40-year mortgages for first-time buyers.
It’s important to note that the following table is simply an indication of the items that are on offer. Your ability to obtain a loan with such a lasting is determined by your age and financial circumstances when creating a credit card applicatoin.
How expensive are long-term mortgages?
Generally speaking, you’re unlikely to stay on the same mortgage deal for 3 or even more decades. In order to keep your mortgage as cheap as possible, it’s advisable to switch deals before your loan reverts back to your lender’s standard variable rate.
To illustrate the potential price of long-term mortgages though, we’ve created a scenario that assumes you’ll be on the same deal for your period of time.
The example below is dependant on a lb200,000 mortgage with no product fees and we’ve calculated the general interest (APRC) at 4%.
The first column shows how your initial monthly repayments will be, while the second shows just how much you’ll repay as a whole within the lifetime of the borrowed funds.
| Term | Initial monthly repayment | Total amount repaid over term | Total interest paid |
| 20 years | lb1,211.96 | lb290,870.56 | lb90,870.56 |
| 25 years | lb1,055.67 | lb316,702.10 | lb116,702.10 |
| 30 years | lb954.83 | lb343,739.01 | lb143,739.01 |
| 35 years | lb885.55 | lb371,930.78 | lb171,930.78 |
| 40 years | lb835.88 | lb401,220.93 | lb201,220.93 |
While taking out a longer-term mortgage could make your monthly repayments much cheaper, overall, the loan becomes significantly more expensive.
Try our mortgage repayment calculator to work out just how much you could be paying for your mortgage every month.
Should you get a long-term mortgage?
Whether you should go for a long-term mortgage deal will depend on your individual circumstances. You’ll also need to consider how fast you’d prefer to repay your mortgage.
If you’d would rather have lower monthly repayments and don’t mind taking longer to pay off the loan, then it’s worth considering mortgages terms of 35 years or more. Be aware that you’ll should also fall below a lender’s age criteria to become eligible to obtain a long-term mortgage.
You should also consider how repaying a mortgage within the long-term will affect what you can do in order to save for retirement.
If you have the capacity to undertake higher repayments and want to clear your mortgage debt sooner rather than later, it may be better to explore shorter mortgage terms using the flexibility of paying off the loan earlier.
