Average mortgage term for first-time buyers rises to 32 years

From raising a deposit to finding an affordable mortgage, getting on the property ladder remains a huge challenge for many first-time-buyers.

Now, new data has revealed that buyers are taking out mortgages with longer terms in order to keep repayments at a manageable level.

TSB found that the average mortgage term for a first-time buyer has increased to 32 years, up from 30 years in 2021, as soaring interest rates made home loans harder to afford.

"Across the UK, the drive to get onto the property ladder is bigger than ever -- with first-time buyers taking out extended repayment terms to acquire a home," said Roland McCormack, TSB mortgage distribution director.

Borrowing for more than 35 years

For previous generations, borrowing for a 25-year term was the norm. But affordability pressures have increased, and FCA lending rules introduced in 2014 rule out most alternative means of stretching affordability, including borrowing on an interest-only basis.

The recent UK Finance Household Review showed an increase in first-time buyers opting for longer mortgage terms.

By the end of 2023, almost one in five people taking out their first mortgage were borrowing with a term of more than 35 years -- up from fewer than one in ten in 2022.

Interestingly, the proportion of borrowing at over 30-year terms began to level off last year, suggesting that the extent to which this could be used to stretch affordability was reaching its limit.

However, this does not tell the full story, UK Finance said. A deeper dive into the data reveals a continued, more rapid, increase in borrowing for more than 35 years. In other words, where customers are taking longer terms to improve affordability, they are needing to lengthen the term even further.

While extended mortgage terms can help buyers onto the property ladder due to lower monthly repayments, it's important to bear in mind that borrowers will end up paying significantly more than they would with a traditional-length deal.

Shorter mortgage shelf-life

Buyers and homeowners looking for a new mortgage in the current market will have to act quickly to secure a deal.

Mortgage products are typically on offer for just 15 days before being withdrawn, financial information service Moneyfacts reports. This is down from an average of 28 days at the start of February, and is the shortest shelf-life of mortgage deals for six months.

The good news is that borrowers have the widest choice of deals for 16 years.

There were 6,004 mortgage products to choose from at the start of March, compared to 5,787 at the start of February and 4,372 one year ago.

For those with a 10% deposit the number of deals on offer stands at 761, and there are 318 deals available for those with a 5% deposit.

'Wise to seek advice'

Rachel Springall, finance expert at Moneyfacts, warned that although some borrowers may be tempted to wait and see if mortgage rates start to fall again, there is a risk that they could miss out on a potentially attractive deal if they wait too long.

With the current uncertainty in the mortgage market, "borrowers would be wise to seek advice if they are looking for a new deal, particularly as the shelf-life of a product remains so unpredictable," Springall added.