UK consumers could pay high levels of interest on extended mortgages
With the steep rises in property prices in the UK coupled with several recent interest rate rises, many first time buyers with no previous property from which to cash in on equity may find it increasingly difficult to get their foot on the property ladder. As a result of this a number of mortgage lenders have had to make changes to their mortgages in order to make it easier for first time buyers to purchase property and to keep the mortgage industry going at a time when property purchasing is getting harder and harder due to house prices.
As a result of this these lenders have made a number of changes. This includes offering higher income multiples on their mortgages, so that borrowers can afford to borrow the amount that they need to purchase a property. Another change is the extension of repayments terms, with the traditional twenty five year mortgage now being stretched to forty or even fifty or more years by some lenders, enabling borrowers to benefit from lower repayments but stretching the debt over a far longer period.
There are a number of concerns in relation to these extended mortgages. In addition to putting the borrower in debt over a far longer period there is also the issue with regards to the interest that will have to be paid on the loan. The longer the loan period the longer the interest will have to be paid, and experts are concerned that borrowers could be paying a fortune in extra interest on mortgages that are twice as long as the traditional mortgage of twenty five years.
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