More Buyers Accept Ultra-Long Mortgages Due To High Rates

More Buyers Accept Ultra-Long Mortgages Due To High Rates
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Research suggests that mortgage rates have seen the highest increase since March of this year. As a result, more and more homebuyers are forced to turn to ultra-long mortgages to afford monthly payments. 

Unfortunately, accepting such long-term mortgages may hurt buyers more in the long run. 

Mortgage rate increase highest since March

An analysis published by Moneyfacts determined that the average fixed rates surged between the beginning of April and May. 

Two-year fixed rates increased by 0.11%. Meanwhile, five-year fixed rate deals increased by 0.09%.

Although these are slightly lower than the figures from the beginning of the year, it is still the highest increase recorded since March 2024.

More options for mortgage products available to borrowers

As expected, many buyers are feeling the pressure of impending mortgage increases. In fact, the number of deals purchased from April to May went up to 6,565the highest it’s ever been in 16 years.

Others are taking advantage of this period of relative stability for mortgage products. Currently, the average shelf life for mortgage products is 28 days. It’s definitely a prime opportunity for buyers to take their time and take advantage of newer and better offers. 

For example, Rachel Springall, a finance expert at Moneyfacts, comments that it would be more economical for borrowers to go for a fixed mortgage rather than the revert rate option. 

The stability of the current fixed rate mortgage products is a much more preferable option than paying higher rates down the road. 

Other homebuyers may even finance their new home through a base rate tracker mortgage. This route provides a dynamic interest rate based on the Bank of England, provided that the BoE slashes interest rates in the next few years. 

Ultra-long mortgages gaining popularity among borrowers

Although product choice has been at its highest level since February 2008, one product is gaining popularity among first-time buyers.

Data from the Bank of England shows the increasing prevalence of mortgages with extended end dates.

Due to the prohibitive cost of monthly payments, aspiring homeowners had to resort to mortgages that run a very long time.

The sector is severely affected by skyrocketing monthly costs. To offset this, many opt for more affordable payments stretched over a period that may extend well into retirement. 

Over the past three years, more than one million mortgages with an end date over 25 years have been approved. 

40 to 49-year-olds head the list


A further breakdown of the demographics revealed the following insights into buyer activity within the property market.

According to the Freedom of Information (FoI) data requested, 91,394 or 42% of new mortgages in the fourth quarter of 2023 were filed under mortgages with very long terms. This is an increase from 38% within the same period last year.

For the last few months of 2023, the demographic that topped the list of approvals for these types of mortgages was those aged 40 to 49. There were 32,305 mortgages attributed to this group. 

At 30,943 new mortgages, those aged 30 to 39 were at a close second. Younger aspiring homeowners who were under 30 accounted for 3,676 mortgages with end dates into retirement.

On the other hand, 18,854 new mortgages were issued to individuals aged 50 to 59. Lastly, 661 approvals were granted to those over 70.

Rise of mortgages with very long terms may pose a threat to borrowers

Sir Steve Webb, ex-Liberal Democrat MP and now a partner at pensions consultancy LCP, made the FoI request that revealed the alarming statistics. 

The challenge of getting on the housing ladder is forcing large numbers of young homebuyers to gamble with their retirement prospects by taking on ultra-long mortgages.

Sir Steve Webb, Partner at LCP

In other words, as more homeowners take out very long mortgages, they may be deprived of the opportunity to finally be mortgage-free after retirement. Borrowers may even be forced to dip into their pensions as they make higher payments well into their golden years. 

Mortgage customers over 67 are currently less than 2% of all loans. However, with the rise of mortgages with ultra-long terms, this figure is expected to balloon to 5% in 2040 and then almost 10% in 2050.

Our Opinion

Affordability is a huge challenge for many would-be buyers for different reasons. Sky-high prices are one of them and one that buyers can’t change.

They can adjust their wish lists and opt for a smaller property, which we know many are doing. They can, if possible, consider less expensive areas. Although this might not be an option for everyone.

High mortgage rates are another reason why many struggle to buy a home. Again, it’s not something that’s in buyers’ control. However, they can reduce their monthly mortgage payments by opting for longer terms.

Ultra-long mortgages can make buying a home more affordable. And while they can cause issues in the long-term, such as we have described above, buyers don’t have to stick with them. After the fixed term has passed, they can look for deals with shorter terms.

It’s likely that mortgage rates will fall, as the BoE is expected to lower interest rates later this summer. So very long mortgages might be a solution for people to get onto the property ladder in the current situation.

And when conditions have improved they can move to mortgages that are shorter and won’t risk their pension pot.


  • News Desk

    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

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