Across mortgage borrowers as a whole, the proportion of customers taking out loans with a repayment term of more than 25 years has more or less doubled over the past five years, from 16% to 32% in the third quarter of this year. Some of this undoubtedly mirrors the near-disappearance of interest-only mortgages in recent years.
The degree to which borrowers rely on longer-term mortgages varies materially with age, in part reflecting the more stringent criteria relating to loans that extend into retirement years.
So far this year, for example, those aged 30 years or less account for nearly 60% of mortgages with a loan term of more than 25 years and fully three-quarters of those that are for more than 30 years.
Moving up the age range, there are many older borrowers taking out mortgages, but the terms shorten. Among those aged 31-40, 79% take out a mortgage with a term of up to 25 years, while 16% have a loan lasting between 25 and 30 years, and 5% have a term of between 30 and 35 years. But among borrowers aged 41-50, 98% have a term of up to 25 years, and 70% have a term of less than 20 years.
Older borrowers are, of course, more likely to have been home-owners in the past, and may therefore have built up equity through owner-occupation. That may leave them in the position of being able to fulfil their borrowing needs over a shorter mortgage term.
With first-time buyers typically about 10 years younger than other borrowers, there are clear differences in the levels of take-up by type of borrower.
CML point out that although it is early days to offer a full assessment, neither the implementation of the mortgage market review in April nor the announcement of macro-prudential actions in June appear to be significantly influencing these trends for the time being.
