Lenders start to offer long-term mortgage offers

MoneyExpert.com research shows that nearly a third of lenders offer maximum mortgage terms of 40 years or more.

Lenders only offering maximum mortgage terms of 25 years are being replaced by long-term offers. Only 23% of the 126 mortgage lenders and products analysed by MoneyExpert.com limit maximum terms for mortgages to 25 years.

Tesco is offering mortgages with a maximum term of 52 years. First Direct offers a maximum 47-year term, while HSBC and Alliance & Leicester offer 40 years.

Borrowers taking out a 25-year repayment mortgage at 6% would pay 644.29 a month, while the same loan over 40 years would cost 550.21 a month, which is a saving of 94 a month. However, over 25 years they could pay up to 93,000 in interest compared with 164,100 over 40 years.

Sean Gardner, chief executive at MoneyExpert.com, says: It makes sense that lenders are responding by offering greater flexibility to borrowers whether it is by allowing them to borrow more or by enabling to spread payments over a longer time. The old model of three times salary and a mortgage lasting 25 years maximum is on the way out.

It can be a good idea to spread payments over a longer period of time if that makes monthly repayments more affordable. However borrowers need to be aware that the longer they have a mortgage for the more they will pay in interest.