The 52-year mortgage

Nearly a third of lenders offer maximum mortgage terms of 40 years or more, MoneyExpert.com research shows

Nearly a third of mortgage lenders* will now allow homebuyers to borrow for 40 years or more with Tesco Personal Finance offering mortgages with a maximum term of 52 years, research from MoneyExpert.com shows. The old days of lenders only offering maximum mortgage terms of 25 years are long gone, analysis by the independent financial comparison site shows.

In fact only 23 per cent of the 126 mortgage lenders and products analysed by MoneyExpert.com limit maximum terms for mortgages to 25 years. It found 38 out of the 126 ñ 30 per cent ñ offer maximum terms of 40 years or more with Tescoís 52 years the longest on offer.

First Direct offers a maximum 47-year term while HSBC and Alliance & Leicester offer 40 years. Most firms still insist customers have paid their loan off by the age of 65 or their normal retirement age. However the longer maximum terms on offer is further evidence that mortgage companies are willing to be flexible in order to help customers on to the housing ladder.

Last week Abbey revealed it would offer borrowers up to five times salary under certain criteria while other firms including Northern Rock at up to 5.9 times annual earnings and Yorkshire Building Society at up to five times salary are already demonstrating flexibility.

Borrowers taking out a 25-year repayment mortgage at, for instance, six per cent would pay £644.29 a month while the same loan over 40 years would cost £550.21 a month ñ a saving of £94 a month. However over 25 years they would pay £93,290 in interest compared with £164,100 over 40 years ñ a difference of £70,810. Rates can go up or down during this period.

Sean Gardner, MoneyExpert.comís Chief Executive, said: ìThe cost of the average home has doubled in the past five years making it more and more difficult for potential homeowners to buy a house. ìIt makes sense that lenders are responding by offering greater flexibility to borrowers whether it is by allowing them to borrow more or by enabling to spread payments over a longer time. The old model of three times salary and a mortgage lasting 25 years maximum is on the way out.

ìIt can be a good idea to spread payments over a longer period of time if that makes monthly repayments more affordable. However borrowers need to be aware that the longer they have a mortgage for the more they will pay in interest. ìAnd nobody should contemplate still having a mortgage to pay when they are no longer working and do not have the income to make monthly payments.”

MAXIMUM MORTGAGE TERM OFFERED PERCENTAGE OF LENDERS

  • Up to 25 years 23 per cent
  • Up to 30 years 24 per cent
  • Up to 35 years 23 per cent
  • More than 40 years 30 per cent

Companies which offer 25-year maximum terms on most products include Halifax and Egg while those who have moved to 30-years for some products include Yorkshire Bank and Smile. Those on 35-years include Barclays, Northern Rock, Nationwide, Abbey and NatWest.

Companies in the 40-year bracket include Coventry and Leeds Building Society. Most firms however insist on employed borrowers paying off their mortgage by 65 although some will allow self-employed borrowers to stretch to 75.

MoneyExpert.com is hosting a Defaqto guide to mortgages on its website aimed at helping customers understand home loans. It is available at www.moneyexpert.com. Not only does it offer very useful information on how to get the best mortgage but it also includes tips on how to navigate through the potential pitfalls found in the small print.

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* Source: Defaqtoís Aequos database

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