57% of buyers opt for 25 year+ mortgage terms: Uswitch mortgage expert investigates

As we enter another year of economic uncertainty in the UK, it seems that the ‘average’ 25 year mortgage term is increasingly becoming a thing of the past. The last year has seen a plethora of news reports on the growing tendency towards extended mortgage terms beyond 25 years, both for first-time-buyers, and those remortgaging into a higher interest rate environment.

A recent study of the data from mortgage broker technology site, Twenty7tec, found that over 70% of all searches were for mortgages with terms exceeding 25 years in length. And according to Experian, 25% of homeowners under the age of 30 now have a repayment term of 35 years or more, an increase of 150% since 2020.

If we look at UK Finance data regarding how the Bank of England base rate increases correlated with the rise in longer mortgage terms, it’s difficult to question the impact of interest rate rises on this trend:

Prior to the first rise (December 2021) the base rate was at 0.1% – 9% of all first-time buyers took out mortgages longer than 35 years at this time
In August 2023, the base rate had risen 14 times to 5.25% – 20% of all first-time buyers were recorded as taking out mortgage terms beyond 35 years at this point
How Mojo mortgages customers’ terms have increased since 2020
We partner with award-winning mortgage broker, Mojo Mortgages, to help meet all of your mortgage-related needs. They reported an increase in those choosing terms of 25 years or longer, from 44% of all customers buying a new home in 2021 to 57% of all purchase customers in 2023. Interestingly, they also saw a similar pattern for those selecting terms upwards of 30 years – 51% of all those customers buying a new home in 2023, as opposed to just 41% back in 2021.

An increase in the term lengths has been seen across all residential purchase and remortgage customers, as well as buy-to-let purchase customers, as demonstrated in this table:

Mortgage applicant type
Average term length in 2021
Average term length in 2023
First time buyer
28
29
Home mover
25
26
Remortgage
21
23
Buy-to-let purchase
23
24
Buy-to-let remortgage
20
18
However, the opposite is true of the buy-to-let remortgage market, with customers choosing shorter terms, on average, in 2023 than 2021. This could be a result of commercial buyers generally having more financial flexibility than residential buyers,or that they’re able to repay mortgage balances down more quickly. It could, however, also potentially suggest that existing homeowners have been more substantially impacted by rising mortgage rates than existing landlords.

Is this only impacting first-time-buyers?
According to the Zoopla house price index, the current average property value in the UK is £264,400, which means someone on an average salary (£28,000) would need to borrow more than nine times their annual salary to take out a large enough mortgage to buy it. The vast majority of lenders cap their lending way below this, at around 4-5 times annual income.

It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum. However, first-time-buyers are not the only ones affected. There has been a less significant, but certain increase in average mortgage term lengths across the board since the Bank of England base rate began to rise in December 2021.

Data from mortgage broker search software, Twenty7tec showed that in 2023, demand for mortgages with terms of 40 years or more rose by 16% across the entire purchase market, whereas searches for all other term lengths fell.

And, actually the greatest rise in searches for 40 year plus term lengths (55%) were by those looking to remortgage. This is likely due to affordability being dramatically reduced for those that took out mortgages when rates were much lower, two and five years previously.