14 March 2024 , 09:25
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More young people are buying homes together, and they're choosing longer mortgage plans to make it easier to pay each month, according to data.
TSB found that more than half of the people buying their first home last year did it with someone else. Less than half bought a place just by themselves. TSB says that now, people usually take 32 years to pay off their first home. That's two years longer than in 2021.
This helps with the high costs of borrowing money, but it means they might pay more interest in the end. First-time buyers made up about one-third of mortgage completions in 2023. The average age of someone buying their first home has fallen to 31, from 32 in 2022.
Also, when people bought a mortgage from TSB in 2023, most of them did it through a video call. Roland McCormack, TSB Mortgage Distribution Director, said: "Across the UK, the drive to get onto the property ladder is bigger than ever with first-time buyers taking out extended repayment terms to acquire a home."
Last week, the chief executive of UK Finance, David Postings, told an industry gathering that a typical first-time buyer in 2023 would have needed to stretch their loan out for half a century to achieve the same level of affordability that they would have had across a 30-year mortgage term in 2022.
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Chief executive of UK Finance, David Postings, said: "But we then rolled forward the average change in house prices, mortgage rates and incomes to the middle of 2023. For that buyer to achieve the same affordability, as measured by their mortgage payments compared to income, they would have needed to borrow over a 50-year term."
"As rates rose through 2023 this calculation increased further. A 50-year term sits outside any lender's underwriting criteria and we're not suggesting we want mortgages of this length. This does, however, demonstrate why we have seen such a significant increase in longer term borrowing."
Paul Heywood, chief data and analytics officer at credit information company Equifax, said: "For those nearing retirement age, it is increasingly difficult to extend loan terms further into the future, meaning they are faced with more expensive monthly repayments."
"Meanwhile, many homeowners will have locked themselves into a new fixed rate that could see them making higher repayments for longer, even when interest rates begin to ease. The starting point for lenders and creditors must be to understand the affordability of their customers, which of those customers are being impacted by rising mortgage rates, and what the extent of that rise is."