UK Lenders Extend Maximum Mortgage Terms
Mortgages with 57-year terms are now being offered by Abbey, the largest mortgage lender in Britain, as buyers of UK properties endeavour to keep their monthly repayments down.
The UK’s mortgage lenders are responding to a trend amongst homeowners to extend their mortgages over a longer period, and so make their monthly repayments more manageable. Abbey is not the first lender to move towards longer terms; according to financial analyst Moneyfacts, 80% of lenders now offer a maximum term of over 25 years.
These lower monthly repayments will appeal to many prospective buyers who may otherwise feel that they are priced out of today’s UK property market. However, the borrower is warned that, taking into consideration the higher interest rate of such a mortgage, the overall amount to be repaid will be significantly higher.
A mortgage to be repaid over a 25-year term has a 5.25% interest rate, with repayments of £599.25 per month, amounting to a total of £179,775 to be repaid. In comparison, a 57-year term mortgage would have lower repayments of £461 per month, amounting to £315,159 in total. The difference in interest to be paid adds up to £135,384.
Due to the increase in the total amount payable, together with the implications of being saddled with debt repayments over such a long period, such schemes are not generally recommended to buyers. However, with current property prices in the UK so high, extended repayment terms are being marketed towards first-time buyers as the key to getting onto the property ladder.
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The UK’s mortgage lenders are responding to a trend amongst homeowners to extend their mortgages over a longer period, and so make their monthly repayments more manageable. Abbey is not the first lender to move towards longer terms; according to financial analyst Moneyfacts, 80% of lenders now offer a maximum term of over 25 years.
These lower monthly repayments will appeal to many prospective buyers who may otherwise feel that they are priced out of today’s UK property market. However, the borrower is warned that, taking into consideration the higher interest rate of such a mortgage, the overall amount to be repaid will be significantly higher.
A mortgage to be repaid over a 25-year term has a 5.25% interest rate, with repayments of £599.25 per month, amounting to a total of £179,775 to be repaid. In comparison, a 57-year term mortgage would have lower repayments of £461 per month, amounting to £315,159 in total. The difference in interest to be paid adds up to £135,384.
Due to the increase in the total amount payable, together with the implications of being saddled with debt repayments over such a long period, such schemes are not generally recommended to buyers. However, with current property prices in the UK so high, extended repayment terms are being marketed towards first-time buyers as the key to getting onto the property ladder.
If you wish to see the original article please click here
posted by Obelisk International at 3:01 pm
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