A Bank of England report has expressed concern at the number of homeowners - especially young first time buyers - taking on 35-year mortgages.
The Bank says a growing number of mortgage-holders are extending the period over which they pay back their loans as they are struggle in the cost of living crisis - but the extended loan period could cause more financial pain in the longer term.
The BoE reports that the share of new mortgage lending on terms of at least 35 years has increased from just four per cent in the first quarter of 2021 to 12 per cent cent in the most recent quarter, Q2 2023.
During this 27 month period, the Bank has hiked the base rate from 0.1 to 5.25 per cent, taking the interest on mortgages, loans and credit cards higher too.
The Bank says it’s seen more households switch to interest-only mortgages to reduce the strain on finances, which means the actual loan is not being paid off.
In its latest financial policy summary, the BoE warns that while the number of homeowners in mortgage arrears has risen, the figure ‘remains low by historical standards’.
But it cautions: “There is evidence that some households are increasing the use of consumer credit in response to cost-of-living pressures, which could lead to greater debt vulnerability.”
Join the conversation
Be the first to comment (please use the comment box below)
Please login to comment