Ultra-long mortgages risk fuelling ‘housing bubble’ of inflated property prices | Personal Finance | Finance

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Ultra-long  risk fuelling a housing bubble of inflated prices that are not supported by the economy, an expert has warned.

New figures released by the show in the last quarter of 2021, about 31 percent of new mortgages extended beyond the age, which is currently 66.

Two years later, this grew to 42 percent of new mortgages, indicating a growing preference for longer-term loans.

While many have been opting for ultra-long mortgage deals to minimise payments in the early years and soften the blow of higher interest rates, concerns are mounting about what they could mean for the future property market.

Pete Mugleston, managing director and mortgage expert at onlinemortgageadvisor.co.uk, told Express.co.uk: “The increasing number of under-30s opting for ultra-long mortgages raises concerns about a potential housing bubble and individuals being trapped in unaffordable mortgages.

“On one hand, the availability of these extended mortgage terms may contribute to increased demand for housing, potentially driving up property prices and fuelling speculation in the housing market. This could lead to a housing bubble characterised by inflated property values not supported by economic fundamentals.”

While ultra-long mortgages may offer lower monthly payments and increased affordability in the short term, Mr Mugleston said: “They also come with long-term risks. Young homebuyers may find themselves locked into mortgages for decades, potentially stretching well into their retirement years.

“This raises concerns about their ability to adapt to changing financial circumstances, such as job loss, income reduction or unexpected expenses.

“Individuals who take on these extended mortgage terms may find it challenging to sell their properties or refinance their loans in the future. This could leave them trapped in mortgages they can’t escape, especially if property values decline or interest rates rise.”

He added: “Young homebuyers should consider the importance of financial planning before taking on significant debt through an ultra-long mortgage, especially with their financial future ahead of them.”

Longer mortgage terms mean homeowners will pay more in over the long run, Alan Davison, personal finance distribution director at mortgage specialists Together pointed out.

He said: “While figures from Experian show a quarter of new homeowners have recently taken on 35-year repayment terms to help bridge rising costs and asking prices – it’s important to remember that the ‘marathon’ might not always be as good as the ‘sprint’.

“We’ve seen a steady increase, since 2019, of people looking to take out ‘marathon mortgages’ with our internal data showing that, of those with mortgage terms of 35 years or more, 7.5 percent were in London, and another 25 percent in the South East of England.”

Although useful for some borrowers as a way of cutting their monthly mortgage payments, Mr Davison said: “They will usually end up paying more in interest over the long run, so it’s key that first-time buyers check out all the options available to them before committing to longer-term repayments.

“It’s always worth speaking to an expert such as a mortgage adviser, who can thoroughly assess a borrower’s individual situation and find out what options are available to them.”

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