"Rising house prices, inflation and low wage growth have put significant pressure on prospective buyers’ incomes."
69% of mortgage brokers are seeing an increase in demand for 35-year mortgages, according to IMLA research.
13% of brokers reported a ‘substantial’ increase in the first six months of 2017.
Three-quarters of lenders and brokers said the increase in demand for 35-year terms is an “inevitable consequence” of low wage growth and rising house prices.
62% of brokers and 68% of lenders agree that longer term mortgages are an essential option for aspiring homeowners, but 16% worry it will limit people’s capacity to save for retirement.
Peter Williams, Executive Director of IMLA, commened: “In recent years, rising house prices, inflation and low wage growth have put significant pressure on prospective buyers’ incomes, meaning that many would-be borrowers now have to spread their payments out for longer periods in order to get a loan (and to qualify for a mortgage under the affordability tests now in place). Recently the PRA raised concerns about longer term mortgages and their negative impacts. In reality, around a third of first-time buyers take out a mortgage with a term of over 30 years and most of these are for less than 35 years.
“The majority of brokers (62%) and lenders (68%) agree that longer term mortgages are an essential option for aspiring homeowners and would argue that this is a response to reality and remains responsible lending. However, this in no way lets the government off the hook in needing to act swiftly to address the housing crisis. With many borrowers struggling to make homeownership a reality, it is recognised that the growing recourse to longer-term mortgages could impact upon people’s capacity to save for retirement albeit this is offset to a degree by the purchase of a property asset.
“In order to prevent retirement saving and homeownership becoming mutually exclusive, government and policymakers have a responsibility to tackle the root of the chronic supply/demand crisis facing the UK. Theresa May’s housing summit at No 10 is recognition of that and working in tandem with the industry, we would hope the government can move forward to improve housing supply and the life prospects of Generation Rent.”