Select Your Cookie Preferences

We use cookies and similar tools that are necessary to enable you to use our website, to enhance your experience, and provide our services, as detailed in our Cookie Notice. We also use these cookies to understand how customers use our services (for example, by measuring site visits) so we can make improvements.

If you agree, we'll also use cookies to complement your website experience, as described in our Cookie Notice. This may include using third party cookies for the purpose of displaying and measuring interest-based ads. Click "Customise Cookies" to decline these cookies, make more detailed choices, or learn more.

Average mortgage term hits record 30 years

Mortgage application form with house keys, calculator and pen

As house prices continue to rise, buyers are opting to pay back their mortgage over a longer period.

A longer term typically means a lower monthly repayment, making a big mortgage more affordable.

The average term of a home loan reached a record 30 years in June, according to the latest data from UK Finance. This is a significant increase from the 25.5 years reported in 2005 when the trade body first started compiling the data.

Some lenders are offering mortgage terms as long as 40 years, and in July the UK government suggested the possibility of 50-year mortgages to help homebuyers budget for the increasing cost of purchasing a property.

Nationwide's monthly House Price Index shows that across the UK, average house prices reached £271,209 in July 2022.

"July saw a modest increase in the rate of annual house price growth to 11.0%, from 10.7% in June," said the building society's chief economist, Robert Gardner. "Prices rose by 0.1% month-on-month, after taking account of seasonal effects -- the twelfth successive monthly increase, which kept annual price growth in double digits for the ninth month in a row.

"The housing market has retained a surprising degree of momentum given the mounting pressures on household budgets from high inflation, which has already driven consumer confidence to all-time lows. While there are tentative signs of a slowdown in activity, with a dip in the number of mortgage approvals for house purchases in June, this has yet to feed through to price growth."

Demand from buyers is supported by strong labour market conditions, with the unemployment rate near 50-year lows and the number of job vacancies close to record highs. At the same time, the limited number of homes on the market has helped keep upward pressure on house prices.

Nationwide expects the market to slow down as pressure on household budgets intensifies in the coming quarters. The Bank of England warned recently that the UK is on course for a recession lasting more than a year and inflation above 13%. Interest rates are also likely to go up again, which would cool down the market further if it feeds through to mortgage rates.

Buyers looking for a home loan as interest rates climb may need to act quickly if they find a good deal as the average length of time for which mortgages remain on the market has fallen to a record low, Moneyfacts has warned.

Mortgage products now have an average "shelf life" of just 17 days -- four days shorter than the previous recorded low of 21 days.

Posted by Fidelius on August 15th 2022

Loading... Updating page...