Nearly half of homebuyers would consider taking out a mortgage over 40 years to keep monthly repayments affordable and get onto the property ladder sooner, according to Santander.
The bank calculated that 3.25 million more first-time buyers could afford to get onto the property ladder with a 40-year mortgage compared to a 25-year term.
These are people who would otherwise not be able to afford the monthly repayments associated with a 25-year mortgage based on their salaries and living costs. The cost of the average monthly repayment for a 25-year mortgage falls by £263 when spread over 40 years.
Analysis of data by Santander shows buyers could save £178,500, or 77 per cent of the average UK house price, by buying a property rather than renting over 40 years. Two-thirds (67 per cent) of those questioned said they saw renting as “a way of lining someone else’s pockets”.
However, nearly a quarter (23 per cent) of potential buyers didn’t realise that spreading a mortgage over a longer term would mean lower monthly repayments.
Santander found that a quarter (23 per cent) of those considering a 40-year mortgage term would look to remortgage to a shorter-term if their finances improved, 37 per cent would pay extra whenever they could to reduce the length, and a fifth (18 per cent) would look to remortgage to a shorter term when they moved house.
Santander UK managing director of mortgages Miguel Sard says: “The possibility of owning a property may seem like a distant dream to some aspiring buyers, many of whom have found themselves locked in a ‘rent trap’ and unable to get onto the property ladder.
“By offering buyers the option of a longer-term mortgage, our aim is to address some of the affordability restrictions they face and support them in buying a home with more manageable monthly repayments.”