The Inside Edge
The office for National Statistics (ONS) has revealed what some believe to be worrying figures in regards to the number of 30 year mortgages currently being taken by new borrowers. The statistics also show that the 25 year deal, which is still seen as the standard term, is dwindling fast.
The ONS’ figures show that 23.3% of all new mortgages are now spread over a thirty year period. Meanwhile, the 25 year term, which accounted for 70% of the overall market in the 1990’s, has fallen to around a 30% share.
The thirty year mortgage numbers have increased since the financial crash back in 2008 and at that stage, borrowers seemed more concerned about taking on more debt over a longer period of time. In the four years that have followed however, mortgage affordability has been one of the factors behind the steady rise.
Bob Pannell, chief economist at the Council of Mortgage Lenders confirmed that the rising costs of home loans were a main contributory factor. Elsewhere, some property experts are concerned at a repossession time bomb that is currently ticking due to homeowners deferring debt in the short term.
Meanwhile, the question of overall mortgage availability has also been highlighted by these figures and in a survey carried out by Canadean Consumer for the Building Societies Association (BSA), it was shown that financing and general availability of home loans was improving.
“Results from our Property Tracker report indicate that the barriers to purchasing property may be largely down to perception, rather than actual experience,” said Paul Broadhead, head of mortgage policy at the BSA.
If, as Mr Boradhead suggests, there is an issue with the public’s perception of the mortgage market, is there a significant proportion of borrowers who are taking out 30 year mortgages unnecessarily?
Meanwhile, there have been several stories highlight beneficial rates from some of the lenders but the issues over raising deposits for first time buyers (FTB’s) still remain. A recent survey has shown that around 47% of FTB’s believe that it will take them ten years or more to save sufficient funds for a suitable deposit.
“Prospective first-time buyers believe they will be 35 years old by the time they get on the housing ladder,” said John Willcock, head of Post Office Mortgages.
As always, there is mixed news for borrowers but it does seem that those who are remortgaging or who have a sufficient deposit for a new home, may have more choice from the market than they may think.