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Brits Now Face A Life Time Of Mortgage Repayments

There was a time, not too long ago, when UK mortgage lenders placed a maximum repayment period of 25-years on mortgages. These days, according to new research published by Money Expert, UK homeowners can look forward to prospect of repaying their home mortgage loans for the best part of their adult working life.

Figures released on a survey undertaken by Money Expert on the lending policy of 126 UK mortgage providers show that nearly one-third of all UK home mortgage lenders will now allow borrower to take out a home mortgage loan for a period of 40-years or longer. Moreover, less than one in four UK lenders only offered the traditional maximum repayment period of 25-years.

Topping the repayment period chart were Tesco Personal Finance, who offer their home loan borrowers a maximum repayment period of 52 years. However, even though they may not top the 52 years on offer from Tesco, the report does show that some of the more traditional UK banks are now offering similar home mortgage products, with First Direct, HSBC and Alliance & Leicester all offering UK borrowers repayment periods in excess of 40 years.

But, is this such a bad thing? According to Sean Gardner, Money Expert chief executive, “It makes sense that lenders are responding by offering greater flexibility to borrowers whether it is by allowing them to borrow more or by enabling them to spread payments over a longer period of time.”

Not everyone agrees, however. Longer repayment periods will mean more interest payments, and higher overall borrowing costs. As Melanie Bien, associate director at independent mortgage broker Savills Private Finance, said: “As well as the added cost, there’s a danger that you could be paying off your mortgage after the state retirement age. This could mean you have to carry on working when you would rather not, or end up having to pay the mortgage out of pension income. It’s essential to work out the total cost of the loan and a budget; if you’re taking out a longer term, consider how you will be able to pay back in retirement.”

But, with the average Brit having a mortgage not for 25 or even 52 years, but 3 and a half years, does this really matter? With the Bank of England’s latest announced rise in UK interest rates to 5%, surely the more appropriate question should be whether or not we Brits can really afford to make the monthly repayments? And here is where the 40 plus year mortgage finds its strength, because the longer the repayment period the lower the repayments, or so the theory should go. Now all we need to address is the increased amount UK home mortgage lenders are willing to lend. Because borrowing five times your annual salary, as Abbey now offer, over a period of 52 years, may well be more than even the most frugal Brit can handle.

Alisdair Milton
12th November 2006


More Information:

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    The biggest difference between a mortgage and other types of loan is the fact that the interest rate changes throughout the term of the loan. Why is this? And which type of interest-rate arrangement is best?
  • Repossession – How and Why
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  • Insuring Your Mortgage Repayments
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  • The True Cost Of Your Mortgage
    It’s easy to say “go and research the market place to find the cheapest mortgage”, but is it that easy to actually do it and how do you know that you have really got the best mortgage deal when you’ve finished?


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