"Even first-time buyers in their early 30s are now stretching terms close to, or beyond retirement age."
Its criteria tracker found that a significant number of borrowers are attempting to stretch mortgage terms to 35 or even forty-years, with ‘maximum age at end of term’ the most-searched term by brokers in August. This backs up research recently carried out by Quilter which showed a 70% rise in 35 year-plus mortgages over the past two years.
This trend for elongated mortgages is potentially as a result of rapidly increasing house prices. With higher prices creating affordability issues, some borrowers are looking to spread their mortgage out over a longer-time period to lower the monthly repayments. This is backed-up by the presence of another criteria in the top five most searched: ‘income multiple used for affordability assessment’, was the second most-searched term in the residential market in August.
Most lenders are happy to offer mortgage terms that reach up until retirement age, but some are now accepting terms that go into retirement. In these cases, lenders require evidence the borrower will be able to afford to make monthly repayments once they retire.
Although the economy is showing encouraging signs of recovery, debt management and late payments are still popular searches. In the residential market ‘missed or late payments’ was the fourth most-searched term by brokers, and connected to this ‘debt management plan – ongoing/ current’ was the second most-searched in the second charge market.
The rush for new investors entering the buy-to-let market showed no signs of slowing down in August. ‘First-time landlord’ was the most-searched term by brokers, and in response lenders are launching new buy-to-let products for borrowers without a property portfolio.
‘Regulated bridging’ remained the number one most-searched term in the bridging category and ‘heavy refurbishment’ returned for the first time since April.
Matthew Corker, operations director at Knowledge Bank commented: “With house prices accelerating at unprecedented levels, it’s not surprising borrowers are looking to lower monthly payments by stretching terms.
“Even first-time buyers in their early 30s are now stretching terms close to, or beyond retirement age. Terms for lenders vary in regards to age limits, some building societies have no max age limit, other lenders tend to limit the maximum age to 70 to 85 years old.
“The expectation from the lender is that the borrower will either overpay, or shorten the term when remortgaging, but this could present an issue for some who are still having to work into their 70s to pay off their outstanding mortgage debt.
“Regulated bridging continues to be popular, and it appears some are using these to adapt and renovate commercial properties. With the shift away from offices, and online shopping becoming more popular, converting offices and retail spaces may become more popular in the coming months.”
