New homeowners will be spending longer than ever paying off a mortgage as they look at ways round increased affordability issues.
A new report by leading mortgage lender Nationwide has found that, with house prices and interest rates steadily rising, many people are now willing to look beyond a normal 25-year mortgage term.
The figures show that the number of first-time buyers taking out 26-year or more mortgages jumped from 28 per cent in the third quarter of 2005 to 34 per cent at the same point in 2006, while more people were also found to be opting for interest-only payments at the start of their loan period.
"Extending the term of the loan can reduce monthly payments significantly. On average in the UK mortgage payments are reduced by £63, but in London this increases to £103," commented Fionnuala Earley, chief economist at Nationwide.
"However, for those borrowers that do choose a longer term, this comes at a high price. The total amount repayable on an average property over the full life of the loan would be more than £25,000 higher on a 30-year mortgage than on a 25-year home loan."
Increasingly stretched mortgage deals have raised fears of more repossessions, which jumped by 65 per cent in 2006 to around 17,000 cases.
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