Mortgages lasting nearly 60 years are currently being offered by UK lenders in an attempt to give consumers a hand with getting onto the property ladder amid rising house prices. However, experts have labeled these long-lasting mortgages 'madness.'
In a bid to attract first-time buyers and assist those desperate to get onto the property ladder, the 57-year home loan, from Abbey National, will require a relatively lower monthly payment. However, soaring interest rates must be taken into account, and the mortgages have been labeled ‘madness’ by experts.
Nick Gardner, director of mortgage broker Chase de Vere Mortgage Management, said: Life-long mortgages are a false economy. You end up paying literally tens of thousands of pounds in extra interest. It really is not a sensible thing to do. The idea of paying off a mortgage for 40, 50 or even 57 years is madness.
The current mortgage interest rate is at 4.75%, but is tipped to increase to 5% by the Bank of England, the highest level for five years. In addition to this, the average house price has soared to a record GBP211,500.
As a result, mortgage lenders have relaxed their terms and many have extended their mortgage term. Abbey National, the UK’s second largest mortgage lender, is offering a 57-year home loan. In April, Nationwide increased its maximum mortgage term to 40 years from 35.
The average first-time buyer is aged 30 but 57-year mortgages allow consumers to take the loan out from the age of 18.
According to This Is Money, lenders have insisted that they have not seen a rush for the loan and do not actively promote this long-term mortgage.