More young homeowners taking on 30 to 40-year mortgages

Two-thirds of homeowners under 30 have mortgages lasting 30 to 40 years, with borrowers typically repaying them by age 59, according to analysis of 190,000 borrowers by Sprive.

Analysis of more than 190,000 homeowners shows that two thirds (66%) of mortgage holders under 30 are now on terms of between 30 and 40 years. By comparison, less than half (42%) of homeowners aged 30-39 have mortgage terms that long, falling to just 6% of those in their 40s.

As a result, today’s young homeowners are typically on course not to own their home outright until they are 59 years old.

Despite these longer repayment periods, thanks to higher loan-to-values and rising mortgage rates – under-30s have an average mortgage rate of 4.50%, compared with 3.89% for homeowners aged 40-49 – monthly mortgage payments remain above £1,000 across every age group.

Under-30 homeowners pay an average of £1,008 a month, rising to £1,138 among those aged 40-49 before easing later in life.

On average, Sprive users have a mortgage of £202,000 on a rate of 4.14% over 25.6 years, pay just under £1100 a month, and are currently on track to be mortgage free at 63 years old.

However, someone with that same mortgage balance, term and rate could save more than £10,700 in interest and become mortgage free almost two years earlier by overpaying just £50 a month.

Increasing this to £100 a month would save more than £19,700 in interest and cut the mortgage term by more than three and a half years.

Jinesh Vohra, CEO of Sprive, said: “Longer mortgage terms have become the price many younger buyers have to pay to get onto the property ladder. Spreading repayments over 30 or even 40 years can make monthly payments affordable, but it also means paying interest for much longer and staying in debt well into later life.

“The good news is that there are ways to cut the debt; making overpayments, even relatively small ones can shave years off the mortgage and save tens of thousands of pounds in interest. Many people don’t realise how much difference regular overpayments can make.”