A survey from London & Country Mortgages has revealed that millennials (those aged 19-34) are generally striving to be much more mortgage-savvy than older generations, with 92% on a repayment mortgage compared with 68% of those aged 55 or over.
This means that 92% of millennials are reducing their mortgage one repayment at a time, while 32% of those who are 55 or over are merely paying off interest. In addition, 69% of millennials are seeking the security of a fixed rate mortgage, compared with only 35% of those 55 years or older.
Now you may be thinking that the main reason millennials are more likely to have repayment mortgages is that there are simply much less interest-only mortgages to be found nowadays, and you would be correct. However, there's nothing stopping any generation from remortgaging, either away from an interest-only deal or towards a fixed rate product, and yet it's mainly millennials that are switching things up.
Compared with all other age groups, millennials had the highest number of remortgagors among their ranks, at 25% compared to 18% of those aged 55+. They were also the group most likely to remortgage for lower repayments, with 34% of millennials remortgaging to reduce their monthly burden, compared with 19% of those aged 55 and over who gave this reason.
That said, this could all be explained by the fact that millennials also face the highest monthly repayments of any group, at £908 per month on average. This means that, given the larger mortgage debt they are trying to cut down to size, they have no choice but to be mortgage-savvy, to do whatever they can to keep their financial burden in check.
In contrast, those 55 and over pay only £430 per month on average. Yet that doesn't mean they couldn't do even better. Mortgage rates are still at record lows, so anyone can benefit from remortgaging, especially if you are on an interest-only mortgage.
"Although the younger generation certainly face challenges when it comes to taking out a mortgage, the older generation hasn't necessarily had it easy," David Hollingworth from L&C Mortgages said. "The FCA estimates that 600,000 interest-only borrowers will see their mortgages mature before 2020, and that many risk being left without adequate provision to pay off the remaining amount on their loan."
For those with large savings pots that aren't gaining much in interest at the moment, one method of reducing costs that 33% of millennials are taking advantage of is an offset mortgage - and given that offset mortgage rates are at record lows, it's clearly worth some consideration. A quarter (24%) of 18-34 year-olds are using these to reduce their term, while 10% are offsetting their savings against their mortgage to reduce their monthly payments. In contrast, only 11% of those aged 55+ have an offset mortgage, despite the fact that they are some of the savviest savers, with double the UK average squirreled away.
Our mortgage search provides an option to look for offset mortgages, but you needn't even look at this area specifically to save. No matter what your age, if you've taken out a mortgage in recent years, before the long run of rate cuts we've been enjoying, there's a good chance you could benefit from having a look at the Best Buys.
David concluded: "Staying on top of your mortgage payments is key to avoiding financial difficulty, and it's imperative to make sure you don't borrow more than you can afford. Using a fixed rate mortgage is a good way of managing what is most likely your biggest outgoing – but it is always worth getting advice on what's the best deal for you."
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