The number of mortgages taken out with a term of 40 years or more has dropped off a cliff in the space of a year.
A Freedom of Information request made by Quilter to the Financial Conduct Authority showed there were just 27 mortgages with a term of 40 years or longer last year, compared with 2,400 in 2019.
According to Quilter, the drop in mortgages with a 40-year term was likely due to fewer providers offering longer terms.
On top of that, it said, many lenders that offered long terms failed to offer a high loan-to-value, which is typically what buyers in this segment need.
Nationwide, for example, had initially capped the maximum term on its 90 per cent LTV lending to 25 years until last month.
Gemma Harle, managing director of Quilter Financial Planning, also warned of the potential higher costs involved with longer term mortgages.
She said: “Borrowers who opt for lengthy mortgage terms can end up paying significantly more over the course of the mortgage despite lower monthly payments.
“It is understandable that the popularity of longer mortgage terms has boomed in recent years as house prices have continued to rise at a faster rate than wage growth. While there is nothing inherently wrong with a longer mortgage it is not something to be entered into lightly as the costs can be considerably more.”
|>25 - 30||>30 - 35||>35 -40||>40||Number of mortgages >25 years||Total|
Carl Shave, director at Just Mortgage Brokers, commented: “Seeing such a vast drop in 40-year term mortgages is very interesting yet perhaps on reflection not too surprising.
“With a dramatic drop in appetite from lenders for the higher loan to value business during the pandemic and with this sector being the most likely to consider the longer terms, the reduction is not necessary in regard to demand but more with simple availability.
“The 25 year mortgage that has historically been seen as the traditional term is now really a thing of the past, with affordability and budgets pushing this higher for many borrowers.”
The average deposit paid by a first-time buyer increased by almost a quarter (23 per cent) to £57,278 last year, compared to £46,449 in 2019, according to research by Halifax.
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