For first-time buyers, it has become incredibly hard to take that important first step onto the property ladder. According to research by Halifax, the average house deposit has increased by a staggering 71% from £19,364 in 2008 to £33,127 in 2018.
Not only do potential homebuyers need years to save for a hefty deposit but house prices have also increased dramatically. In the last 30 years, they’ve rocketed 554% meaning that homebuyers going monthly mortgage payments are a lot higher too.
Due to these circumstances that first-time buyers in the UK are currently facing, it may come as no surprise that nearly half of potential homebuyers would consider taking out a mortgage over a period of 40 years, according to Santander. This would keep their monthly payments down and allow them to get onto the property ladder sooner.
The bank calculated that 3.25 million more first-time buyers could afford to get onto the property ladder by using a 40-year mortgage as opposed to a 25-year term.
Although buyers would be paying the mortgage off over a much longer period, the monthly cost would be considerably lower. The cost of the average monthly repayment for a 25-year mortgage falls by £263 when spread over 40 years – so for many, it might really be worth it.
Santander’s analysis showed that buyers could save £178,500, or 77 percent of the average UK house price, by buying a property rather than renting over 40 years.
Around a quarter of those considering a 40-year mortgage term would look to remortgage to a shorter-term if their finances improved and just over one third would pay extra whenever they could to reduce the length.
Seeking professional advice is important though, we will be able to recommend the most appropriate term for you and your personal circumstances and help you decided on a mortgage that’s right for you.
If you, or one of your loved ones, could benefit from a 40-year mortgage term to get that first step onto the property ladder, contact your adviser today to discuss your options.