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Rising House Prices Drive UK Homebuyers Towards 'Marathon Mortgages' to Ease Monthly Payments

October 16, 2023

The dream of owning a home is becoming increasingly challenging for young homeowners in the UK as they grapple with the harsh reality of soaring property prices and the rising cost of living. A recent analysis by Experian revealed that one in four new homeowners aged 29 and under opted for "marathon mortgages," extending their repayment terms to 35 years or more to make their monthly mortgage payments more affordable. This shift represents a significant departure from the historical norm and reflects the struggle first-time buyers and movers face in the current housing market.

Experian's research found that between January and March of this year, 25% of young homeowners had chosen repayment terms of 35 years or longer, a significant increase from the 10% recorded in January 2020. This surge in marathon mortgages, some even extending to 40 years, is a response to the growing gap between escalating property prices and the limited means of potential buyers.

However, while marathon mortgages can provide short-term relief in terms of lower monthly payments, they also mean that some homeowners will be approaching retirement age or even retire before fully paying off their loans. Traditionally, standard mortgage terms have been set at 25 years. Therefore, a more extended repayment period may have implications for the long-term financial security of homeowners.

High interest rates have added pressure to borrowers' shoulders, making many feel financially constrained. As a result, experts are encouraging individuals to explore ways to secure better deals on their mortgage terms to ensure they're on a more sustainable path to homeownership.

However, there might be a glimmer of hope on the horizon. The Bank of England's recent decision to keep interest rates steady at 5.25%, the first such pause in almost two years, is causing mortgage rates to drop. The average new five-year fixed mortgage rate has dipped below 6% for the first time since early July, providing some much-needed relief for prospective buyers.

In addition, there is growing competition among lenders to attract customers, resulting in a flurry of mortgage rate reductions, and experts anticipate further reductions in the coming months. As a result, prospective homeowners may be able to explore a range of competitive mortgage deals, including "best-buy" five-year fixed-rate options with rates below 5%. While these deals often require substantial deposits or may come with associated fees, they offer a path to more affordable homeownership.

If you want to learn more, contact our conveyancing team who can help discuss this further. 

Information gathered from The Guardian, see here

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