Are 40-year mortgages becoming the new normal?

Homeowners paying off their mortgages well into their 70s is set to become the "new normal" as more than half of loans can now be extended over 40 years. 

Historically mortgages longer than 25 years were relatively unheard of, but the maximum length of time over which borrowers can repay the cost of their home has increased considerably in recent years, data compiled by Moneyfacts. 

Some 51 per cent of mortgage deals available on the market are available over a maximum repayment period of 40 years, the data found, up from 36 per cent in 2014. 

By contrast just 3 per cent of deals require borrowers to repay within 25 years, down from 7.5 per cent in 2014. 

Mortgages are getting longer due to the sharp rise in house prices - and monthly mortgage payments - in recent years. By choosing longer terms homeowners can afford to take out bigger loans, although they will be more expensive in the long run as more interest will be paid. 

It also means more homeowners will be in their 70s or even 80s before they have paid off their mortgages, as the average age of first time buyers in the UK has now risen above 30. 

Across the country, the average value for a home stands at £302,002 in March, according to Rightmove.

Darren Cook, finance expert at Moneyfacts.co.uk, said: “Historically, a standard mortgage term generally amounted to a period of 25 years, but most 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.

“Not only are the number of mortgages at a maximum term of 40 years increasing, but the number of products at max 25-year terms and 30-year terms are decreasing.

Between March 2014 and today, the number of 25-year maximum term mortgages has fallen by 152, now accounting for only 2.97 per cent of all residential products available. Meanwhile, the number of mortgages with a 30-year max term have dropped even more significantly, falling from 606 to 140 over the period. 

“A longer-term mortgage may reduce the monthly repayments of a mortgage, however, the additional interest that accumulates over an extended mortgage term could be considerable.

A £200,000 repayment mortgage at a rate of 2.50 per cent over 25 years equates to a monthly repayment of £897.23 and total interest payable would be £69,169 over the term.

However, the same mortgage taken over a 40-year term would reduce the monthly repayments down to £659.56, but increase the total interest to be paid to £116,588, resulting in an additional £47,419 in interest."