September CPD Newsbrief — Mortgages
30-year mortgage applications rise with house prices
Rising house prices may be forcing borrowers to apply for longer-term mortgages of 30 years or more to reduce their monthly payments.
The Sunday Telegraph reports that 20 per cent of the 171,000 new mortgages taken out between April and June were for 30 years or longer, compared with 18 per cent in the previous quarter, according to data from the Council of Mortgage Lenders (CML).
First-time buyers are also spreading their payments over longer terms, with 28 per cent of all new first-time loans in Q2 taken out over 30 years or more, compared with 26 per cent in Q1. Ten years ago, only 4.5 per cent of all new mortgages were for more than 30 years.
The CML believes borrowers are opting for longer-term mortgages in the wake of rising property prices and fears of a hike in interest rates, which mean borrowers are struggling to meet their monthly payments. It says the increase in 30-year mortgages is also due to the Mortgage Market Review making affordability checks tougher to pass.
In July, Bank of England deputy governor Andrew Bailey warned longer-term mortgages could create a problem for borrowers, should their income fall in later life. “We have to watch this very carefully, because if mortgages extend beyond the point at which people’s income falls off, then we have a long-term problem.”
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