How risky are the longer-term mortgages that more borrowers are taking out?

A 251% increase in the number of borrowers taking out longer loan terms has been discovered by Quilter, but the wealth manager says this isn't always a bad thing

The risks are examined.

According to new research, a growing number of borrowers may still have to pay off their mortgage in retirement.

Despite recent drops in mortgage rates, rising home prices still make it difficult to climb the property ladder.

The Bank of England and the Financial Conduct Authority (FCA) have recently urged lenders to be more accommodating and loosen loan-to-income requirements in an effort to stimulate the market.

However, taking out a longer-term loan is an additional strategy to get around affordability issues.

The number of people taking out mortgages with terms of 35 years or longer has significantly increased, according to Quilter's analysis of a Freedom of Information (FOI) request from the FCA.

They are frequently referred to as marathon mortgages.

According to its analysis, 30,338 mortgages issued to individuals over 36 with terms of 35 years or longer were sold in 2024.

Since 2019, the number of borrowers taking out longer loan terms has increased by 251% over a five-year period. These long-term loans have also become more popular among borrowers between the ages of 31 and 35, up 56%.

This implies that many borrowers in their seventies may still be in debt.

Given that the average annual cost of retirement has increased to £43,900, that could put additional strain on your golden years.

However, according to Quilter, longer loans might not be such a bad idea.

Marathon mortgages' rise.

Borrowers typically have a 25-year mortgage term, but spreading out the cost over 35 years can make more financial sense because it lowers the monthly repayments, especially in light of rising mortgage rates and other expenses.

The monthly cost of a 25-year, 200,000 mortgage with a five-year fix at 5.01 percent would be £1,170. However, if the term was extended to 35 years, the monthly repayments would drop from 160 to 1,010.

A borrower could have kept 9,600 over five years, even though that might not seem like much.

According to the data, more senior borrowers appear to have been doing this since 2019.

90,616 borrowers between the ages of 31 and 35 obtained a mortgage with a term of 35 years or longer in 2024, an increase of 8.5 percent per year, according to the study. 30,338 borrowers were older than 36, representing a 42.5% annual increase.

Do loans for marathon mortgages carry any risk?

Former pensions minister Steve Webb and other analysts have warned that these longer-term mortgages pose a risk to retirement.

Given that the long-term cost of a 35-year mortgage will increase, there is a significant financial risk.

With a 25-year term, the same 200,000 mortgage would cost 351,103, and with a 35-year term, 424,473.

That is a difference of 73,370.

But according to Zara Bray, a mortgage specialist at Quilter, this doesn't necessarily have to be seen negatively, particularly since there will be chances to remortgage to shorter terms and lower rates, and borrowers can overpay if they have extra money.

In order to assist with mortgage payments, retirees may even downsize.

"This is a good example of advice enabling customers to stay in their homes during difficult macroeconomic conditions, considering that most mortgages are supported by a mortgage adviser," Bray stated.

"In the short term, it might make sense to extend your mortgage past retirement age in order to keep other assets invested. But the secret to avoiding problems with a long-term mortgage later in life is to talk to your adviser on a regular basis. They will be actively looking for better rates or new, creative products that alleviate the strain on affordability, giving you more options when your fixed term is up.