Money News
As affordability becomes increasingly difficult so the concept of mortgage free living is rapidly becoming a distant dream for first time buyers (FTBs). As a result, the standard term considered for a mortgage (25 years) is perhaps becoming less relevant.
Julie Harris of moneyfacts.co.uk points out that as house price rises show no signs of abating, today's buyers face two major obstacles. First, being able to borrow the amount needed to purchase the property and second, being able to afford the monthly repayments.
Actions taken by lenders in the last 12 - 18 months show that they understand the difficulties potential buyers face. Many have reacted by offering enhanced income multiples, group mortgages, interest only loans and participation in government schemes to assist first time buyers with what is now a massive leap on to the first rung of the property ladder.
"Most lenders have adopted one relatively simple way to make the repayments more affordable, by extending the maximum term of the loan - to anything up to 52 years. By spreading the mortgage over a longer period of time, monthly repayments can be reduced to a more affordable level," says Harris.
A moneyfacts.co.uk survey reveals that eight out of ten lenders now offer maximum mortgage terms in excess of 25 years. Meanwhile, a quarter of lenders are now offering a 40-year mortgage term and a handful are offering the maximum possible term of 52 years.
"It's a frightening thought to think you could potentially be forking out for that hefty monthly mortgage payment from the moment you turn 18 until the day you retire at 70," adds Harris.
20 February 2007 © Moneyextra.com
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