Majority of mortgage borrowers now opt for 30-year terms or longer

Over half of mortgage borrowers now choose a 30-year mortgage or longer, according to research by Uswitch in partnership with online mortgage advisors Mojo Mortgages. This marks an increase from 41% in 2021 to 51% last year.

The trend towards longer mortgage terms is seen across all types of mortgage applicants, including first-time buyers, home movers, remortgage customers, and buy-to-let purchasers.

The average term length for first-time buyers has increased from 28 years in 2021 to 29 years in 2023, while remortgage customers have seen the average term length rise from 21 to 23 years.

The affordability crisis is a key driver behind this trend. With the average property price in the UK now standing at £264,500 and the average salary at £34,900, potential homeowners would need to borrow more than seven times their annual salary to afford a home.

However, most lenders cap their lending at four to five times the annual income, leading borrowers to extend their mortgage terms to make monthly payments more affordable.

Kellie Steed, mortgage expert at Uswitch, said: “According to the Zoopla house price index, the current average property value in the UK is £264,500, which means someone on an average salary (£34,900) would need to borrow more than seven times their annual salary to take out a large enough mortgage to buy it.

“The vast majority of lenders cap their lending way below this, at around four to five times annual income. It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum.”

The data from Mojo Mortgages shows that in 2023, the average first-time buyer borrowed £189,693 at an interest rate of 5.27% over a term length of 29 years, resulting in monthly repayments of £1,065. Extending the mortgage term to 40 years could reduce monthly payments by £116.

Steed further explained: “Put simply, the longer your mortgage term, the smaller your monthly repayments. Borrowing the same amount over a longer term stretches your affordability, potentially reducing unaffordable monthly repayments to affordable ones. However, extending the term means paying more interest overall.”