Nearly seven in ten (69%) mortgage brokers saw an increasing demand for 35-year mortgages, according to the latest research from the Intermediary Mortgage Lenders Association (IMLA).
The firm’s Intermediary Lending Outlook study also found that 77% of brokers and 74% of lenders reckon this soaring demand for 35-year mortgages is an ‘inevitable consequence’ of rising house prices and low wage growth.
Speaking on the findings, Peter Williams, executive director of IMLA, said the pressure on prospective buyers’ incomes leads to borrowers having to extend their payments for longer periods in the hopes of a loan.
He commented: “Recently the PRA raised concerns about longer term mortgages and their negative impacts. In reality, around a third of first-time buyers take out a mortgage with a term of over 30 years and most of these are for less than 35 years.”
Longer term mortgages are seen as an essential option for aspiring homeowners, according to 62% of brokers and 68% of lenders.
“This in no way lets the government off the hook in needing to act swiftly to address the housing crisis,” argued Williams. “With many borrowers struggling to make homeownership a reality, it is recognised that the growing recourse to longer-term mortgages could impact upon people’s capacity to save for retirement albeit this is offset to a degree by the purchase of a property asset.”
What’s more, 13% of brokers reported a substantial increase in long-term mortgages (more than 10%) in the first six months of 2017. Meanwhile, 16% of lenders and brokers worry it will hinder people from saving for retirement.
Williams also claimed that the government and policymakers have a duty to challenge the chronic supply/demand crisis facing the UK.
He said: “Theresa May’s housing summit at No 10 is recognition of that and working in tandem with the industry, we would hope the government can move forward to improve the housing supply and the life prospects of Generation Rent.”