Top Mortgage News

Derin Clark

Derin Clark

Online Reporter
Published: 14/10/2019

With many consumers struggling financially, Moneyfacts.co.uk latest research showing that over half of residential mortgages now have a term of up to 40 years will be good news, as it will mean more borrowers will be able to spread their mortgage repayments over a long time period.  

Research by Moneyfacts.co.uk found that 2,782 (57.01%) of residential mortgage products currently available have a standard maximum mortgage term of up to 40 years.  

Products at maximum mortgage term (residential mortgages)

Max term 40 years 35 years 30 years 25 years
Oct 2018 2,412 (55.55%) 1,645 (37.89%) 136 (3.13%) 149 (3.43%)
Oct 2019 2,782 (57.01%) 1,735 (35.55%) 195 (4.00%) 168 (3.44%)

Darren Cook, finance expert at Moneyfacts.co.uk, said: “Historically, a standard mortgage term generally amounted to a period of 25 years, but a growing majority of products are now available to be extended for a period of 40 years. By extending their mortgage term, borrowers may be looking to reduce their monthly repayments and therefore are more likely to meet strict affordability requirements.

“Yorkshire Building Society is the latest mortgage provider to increase its maximum mortgage term criteria to 40 from 35 years, at the same time increasing its criteria on the maximum age of a borrower at the end of a mortgage from 75 to 80 years.

“It appears that mortgage providers are permitting extended maximum mortgage terms of up to 40 years in conjunction with extending the maximum age that a borrower may be at the end of a mortgage. Our recent research shows that more than four-fifths (83%) of residential mortgages can end when the borrower is 70 years of age or older.

“A longer-term mortgage may reduce monthly repayments, however, the additional interest that accumulates over an extended mortgage term could be considerable. For example, a £250,000 repayment mortgage at a rate of 2.50% over 25 years equates to a monthly repayment of £1,121.54 and total interest payable would be £86,463 over the term. However, the same mortgage taken over a 40-year term would reduce the monthly repayments to £824.45, but increase the total interest to be paid to £145,733, resulting in an additional £59,270 in interest.

“Furthermore, the longer a borrower extends their mortgage term, the older they will be when they have finally repaid their mortgage. An extended mortgage term may go beyond pension age, so it is imperative that these borrowers consider their options and attempt to make provisions if their personal circumstances change.”

Mortgage rates continue to be highly competitive this week, with many of last week’s top rates still available to borrowers. As well as this, the top rates across all charts are available on two year fixed deals, which is good news for those who want the security of locking their mortgage into a fixed rate.

While there has been a year-on-year increase in house prices, the housing market is at its slowest level of growth since April 2013, the latest Halifax House Price Index reveals.

According to the House Price Index, the average house price in September was £232,574. This is just 1.1% higher than the same month the previous year and only a 0.4% increase from July to September compared to April to June. As well as this, the House Price Index shows that house prices fell by 0.4% in September compared to August.

Russell Galley, managing director at Halifax, said: “Annual house price growth slowed somewhat in September, rising by just 1.1% over the last year. While this is the lowest level of growth since April 2013, it remains in keeping with the predominantly flat trend we’ve seen in recent months.

“Underlying market indicators, including completed sales and mortgages approvals, continue to be broadly stable. Meanwhile for buyers, important affordability measures – such as wage growth and interest rates – still look favourable.

“Looking ahead, we expect activity levels and price growth to remain subdued while the current period of economic uncertainty persists.”

Moneyfacts UK Mortgage Trends Treasury Report, not yet published, reveals that the average two-year fixed rate at maximum 95% loan-to-value (LTV) has increased by 0.05% from 3.23% to 3.28% since last month and has returned to the same level that was recorded six months ago. However, the average two-year fixed at 90% LTV has increased by only 0.01% to 2.65% since last month, but is 0.02% higher than the average rate that was recorded six months ago. Despite this, the difference between the two rates this month stands at a significant 0.63%.

In contrast, the average two-year fixed rate at maximum 60% LTV has decreased by 0.04% from 1.84% to 1.80% since last month and has reduced by 0.11% since April this year.

One hundred and seven out of 129 two-year products at maximum 95% LTV are available to first-time buyers, with 98 of these products available up to a maximum mortgage term of either 35 or 40 years and 94 products available up to a maximum age of 75 years of age and above at the end of the mortgage term.

Residential mortgage product analysis

Average two-year fixed rate – by LTV

Max LTV

60%

75%

80%

85%

90%

95%

Apr-19

1.91%

2.34%

2.45%

2.47%

2.63%

3.28%

Sep-19

1.84%

2.34%

2.42%

2.46%

2.64%

3.23%

Oct-19

1.80%

2.32%

2.39%

2.45%

2.65%

3.28%

Difference

-0.04%

-0.02%

-0.03%

-0.01%

0.01%

0.05%

Source: Moneyfacts UK Mortgage Trends Treasury Report

Darren Cook, Finance Expert at Moneyfacts, said:

“It appears that mortgage providers may be factoring in a larger proportion of default risk into rates at higher LTVs, where, among other things, competition and lower wholesale funding costs seem to be benefiting borrowers who have a greater equity stake in their property and are sharing much more of the risk with the lender at lower LTV bands.

“The difference in average rates between 90% and 95% LTVs has historically always been greater than differences in average rates between LTVs lower down the tier scale, so it is always worthwhile for a potential first-time buyer to try to raise an additional deposit and attempt to step down the ladder to find a mortgage at lower interest rates. With rates at the 95% LTV rising faster than at any other tier at the moment, it is likely the gap between these two higher LTV tiers, which currently stands at 0.63%, could widen in the coming months.

“Higher LTV fixed mortgage rates may be creeping up, but the affordability of these products may be helped by the fact that of the 107 two-year fixed rate products at maximum 95% LTV available to first-time buyers, 98 are available up to a maximum mortgage term of either 35 or 40 years and 94 products are available up to a maximum age of 75 years of age or above at the end of the mortgage term. This enables borrowers to lower their monthly repayments by spreading the cost, which as a result makes them more affordable – helping to pass stringent affordability tests when applying for a mortgage.”

Find out more about getting on the housing ladder.

It’s been a relatively quiet week with regards to the top mortgage deals, with only a few changes to speak of. There has, however, been one or two minor rate drops and product withdrawals to note.

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