Mortgage lenders are becoming increasingly happy for customers to take out long-term loans, with a sharp rise in the number of 40-year products on the market.
Research published by Moneyfacts showed that 51% of all loans can now have repayments spread over four decades. This represents a big change in the market, given just 36% of mortgages could be taken on this basis five years ago.
The number of 35-year deals has also increased, rising from 37% of the market to 43%, as the traditional idea of a 25-year loan disappears. Just 3% of mortgages are now restricted to a 25-year term.
On an absolute basis, 2,604 products are available for 40 years and a further 2,221 which are available up to 35 years.
Allowing borrowers to take out longer terms may be helping more first-time buyers onto the ladder. Data from UK Finance showed there were 25,100 new first-time buyer mortgages completed in January 2019. This figure is 4.6% up year-on-year.
The number of home mover mortgages also increased compared to a year ago. The trade body said 25,300 were completed in January, 2.8% higher than 12 months ago.
There was less good news for the buy-to-let market. The number of mortgages completed fell by 1.8%, dropping to 5,500 in January. However, the rate of decline has started to slow in recent months.
People living in rented properties still have more expensive accommodation costs than those who own their own home, according to research by Halifax.
The lender’s figures showed that the typical buyer spends £729 a month servicing their mortgage while the average renter spends £759 each month on rent. This represents a saving of £366 per year for homeowners.
However, the gap is getting smaller between the two groups. In 2017 the average saving by being a homeowner was £900 per year.
The gap today is widest in London, where the typical renter pays £373 extra each month than a home owner. This represents an extra £4,475 each year and is equivalent to a 21% difference.
The Yorkshire & the Humber region had the smallest percentage difference at 5%. This means the annual saving by buying is £361.
House prices are continuing to rise in most areas of the country, although the growth rate has continued to slow. The average house price grew 1.7% in the year to January, according to UK Finance. This was slower than the 2.2% growth rate recorded in December and represents the smallest annual growth since July 2013.
UK Finance said this slowdown was mainly due to properties in London and the South rising in value much more slowly, or actually falling.
In the last year, prices in London dropped by 1.6%, although the capital remains the most expensive place to buy. Prices in the East of England also declined, falling 0.2% year-on-year.
Richard Sexton – Business Development Director, e.surv Chartered Surveyors