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Kevin Peachey, a cost of living correspondent, reported that first-time buyers are opting for mortgages with an average term of 31 years due to the enduring struggle of home affordability. This marks an increase from a decade ago when the average mortgage term for first-time buyers was 28 years, as stated by figures from banking trade body UK Finance. Despite recent decreases in mortgage rates, the term length for these loans has not shown any signs of decreasing.
Lenders typically permit mortgage terms up to a maximum of 40 years, a popular choice among first-time buyers in their 30s who are stretching their finances to enter the property market. The average mortgage term extended in 2022-23 and has remained elevated since without much fluctuation. While longer terms result in lower monthly repayments, the overall cost of the loan increases since interest is paid for a more extended period.
UK Finance highlighted that the affordability of initial mortgage payments relative to income continues to be challenging for first-time buyers, even with the recent decrease in interest rates. Rising house prices have largely counteracted any benefits from lower rates, as outlined in their review of household finances. The data also showed a surge in property completions in the first three months of the year, particularly among first-time buyers and existing homeowners, just before the stamp duty deadline on 1 April.
Following the stamp duty changes, property completion numbers peaked in March as buyers rushed to finalize purchases. However, there has been a significant decline post-deadline, evident in the decrease in mortgage approvals for house purchases in April according to the latest data from the Bank of England. Despite affordability challenges, the UK housing market remains buoyant, with low unemployment levels sustaining momentum in property values. Nationwide reported a 0.5% increase in house prices in May, following a slight drop in April, with property values rising by 3.5% over the past year to an average of £273,427
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