The ever increasing popularity of longer term fixed rate mortgages has come as no surprise to mortgage brokers at Anderson Harris.
In a recent blog, the London-based brokers said they had not been surprised at recent figures from the Halifax, which revealed more than a quarter of first-time buyers are opting for longer-term mortgages that extend beyond the traditional 25-year time frame.
John Harris, director of Anderson Harris, said: “This comes as no surprise to mortgage brokers who have seen a steady increase in the number of first-time buyers opting for longer mortgage terms in order to make monthly payments more affordable.
“We often advise first-time buyer clients to take the longest mortgage term possible.”
Certainly extended mortgages have proved to be useful for buyers who run into financial trouble, as Mr Harris suggested making overpayments when possible will allow home owners far more breathing room than they would enjoy under a 25-year scheme.
He said: “Most fixed-rate mortgages (which the majority of first-time buyers tend to opt for) allow borrowers to overpay by up to 10 per cent of the mortgage amount per year without penalty.
“So if you can pay overpay each month you can pay the debt down at your own pace, but are not contractually obligated to, which allows you flexibility.”
Previously critics of mortgages exceeding 25 years have drawn attention to the staggeringly high final bills for long-life mortgages, as well as pointing to the inflexibility of debt repayments.
House buyers who took out 30-year or more mortgages face paying more interest over the longer-term, even though monthly payments are lower.
Mr Harris said as long as buyers made consistent overpayments there are no major drawbacks in long-life mortgages.
He said: “Making overpayments creates the opportunity to take payment holidays with most products, meaning if you do run into serious trouble (loss of a job, for example) you can then stop paying your mortgage altogether for a period of time.”
However, even as far back as September 2014, the Council of Mortgage Lenders revealed there had been an increase in the number of first-time buyers who took out 30-year or more mortgages.
