Last month, Google reported that searches for the topic ‘50 year mortgage’ had risen by 120% in the last 30 days. Given the current uncertainty in the mortgage market, this probably isn’t surprising.
Interest rates are rising, with a 6% interest rate being predicted for 2023. Home owners who are worried about rising monthly repayments on their mortgage are looking for some certainty that allows them to plan ahead long term.
But is it actually possible to get a 50 year mortgage? And if so, is it a good idea to agree to fix your mortgage for that long? We answer all your questions here…
Firstly, can you get a 50 year mortgage?
The short answer is: it’s certainly looking likely. As of August 2022, a new lender called Perenna has been granted a licence to offer a 50-year fixed rate mortgage in the UK, meaning people could fix their mortgages for 50 years.
The idea of a 50 year mortgage may seem strange as we are used to a market where fixed rates of between two and five years are the norm. However, it seems that Perenna may not be alone for long in offering a long fixed term. It’s likely that more lenders will now look to bring out similar long-term fixed mortgages, especially in light of the current economic climate.
The idea of ultra-long term mortgages was initially discussed back in July 2022, when the Government reportedly considered encouraging 50-year mortgages in order to promote intergenerational lending as a way to help younger buyers get onto the housing ladder. And now with interest rates on the rise, it’s not only first time buyers who could benefit from 50 year mortgages.
What are the pros and cons of a 50 year mortgage?
The benefits of long-term mortgages
A key group who could benefit from long-term mortgages are first time buyers. The 5 per cent deposit option on the mortgage is attractive to those getting a foot on the ladder, and the fixed rate provides security amid the ongoing interest rate uncertainty.
Another group who are likely to be considering long-term mortgages are those who are coming to the end of their current deal and worried about the impact of the current rate rises on their next mortgage. At a time where mortgage rates are on the rise, and the future is uncertain, a long-term product could be very tempting to a lot of homeowners. A 50 year mortgage means that homeowners can plan further ahead financially with the security of knowing exactly what their mortgage payments will be long term.
For homeowners in general, a benefit of a longer term mortgage is that it means you avoid the inevitable hassle and stress of re-mortgaging your property every two or five years.
The disadvantages of long-term mortgages
One of the downsides to ultra-long term mortgages is that higher rates are usually charged on them. Whilst there aren’t enough 50 year products on the market yet to make an accurate prediction on the rates charged, mortgage providers Habito and Kensington have been offering long-term mortgages of up to 40 years for a while now and they charge significantly more than the market average for their long-term fixes.
Of course, another key aspect to consider is that even though rates are increasing at the moment, they could start to go down. In this instance, those locked into 40 year terms could find themselves paying much more than the market average. Many mortgage products charge early repayment fees for exiting the mortgage, and if these fees proved to be unmanageable, the homeowner may have no option but to stay locked into their mortgage and pay the increased rates. With this in mind, if you are a borrower considering an ultra-long term mortgage, you may want to look out for a mortgage with no early repayment charges.
And of course, another disadvantage is that 50 or even 40 years is a long time to plan ahead, and circumstances change. If you’re considering a long-term mortgage, it’s pertinent to look for a lender who gives borrowers the ability to port mortgages to another property just in case your circumstances do change in the years to come.
How a mortgage broker can help
At TaylorMade, we understand that it’s a confusing time to be mortgaging or remortgaging and you’ll probably have a lot of questions. That’s where we can help. We are professional independent mortgage advisors and can offer friendly, helpful advice on which mortgage deal would be the best for your circumstances, as well as offering today’s best mortgage rates.
