A fifth of first-time buyers are taking out mortgages for 35 years or more to get on the housing ladder as budgets are squeezed

A record 20 per cent of first-time buyers are taking out mortgages longer than 35 years as they stretch their finances to climb the property ladder.

Figures from industry body UK Finance illustrate the lengths many are going to to afford a home, amid higher interest rates and cost of living pressures.

These types of agreements were once a rarity. Spreading payments over a longer period makes them more affordable in the short term.

But it means they will accrue more interest and cost more overall.

And for buyers in their 30s or older, it will mean they will still be paying their mortgages into their 70s.

The average age of a first-time buyer is 32.8 years old according to UK Finance.

James Thatch, head of analysis at UK Finance, said: ‘Rising interest rates and cost of living pressures, combined with high house prices, have meant buyers are looking for ways to extend their affordability.

“Against this backdrop, the proportion of first-time buyers taking out longer-term mortgages has slowly increased through 2023, although this trend appears to be moderating.”

The figures show how the Bank of England’s higher interest rates, which have risen from 0.1 per cent in December 2021 to 5.25 per cent today, are affecting the financial futures of new generations of buyers.

At 20 per cent in September, the proportion of first-time buyers taking out mortgages was the highest recorded for almost two decades.

The proportion of first-time buyers signing these types of long-term deals was just 9 per cent in December 2021, when the Bank of England began raising interest rates.

And it was just 2 percent when comparable records began in 2005.

UK Finance figures showed that mortgages with durations of more than 30 years were also increasingly popular with homebuyers, accounting for 56 per cent of transactions, also a record.

And among those who move house, one in three (33 percent) takes out mortgages for more than 30 years.

UK Finance said opting for a longer-term deal may be “a choice rather than a necessity”, with some borrowers opting to keep monthly costs low even if they can borrow shorter term.

And he said they would have the option to shorten the deadline at a later date.

Former Pensions Minister Ros Altmann said: “Given the dramatic rise in mortgage rates and the high levels of house prices we have seen, it is not surprising that first-time buyers are having to take out longer mortgages. term to have any hope of being able to afford to borrow enough to buy a first property.

‘The monthly costs of a longer loan will be less but of course in the long run you will end up paying a lot more to your lender as the total payments will be higher the longer the term of the mortgage.

‘This means more people are likely to continue paying their mortgages later in life, possibly into retirement. This will require careful financial planning as people evaluate their working lives.’

Figures published this week by the Office for National Statistics (ONS), comparing cost of living pressures for different types of households in September, showed that mortgage holders were suffering the highest rate of cost inflation at 9 .3 percent, thanks to higher interest rates. .

That compares with an average of 8.2 per cent and 7.2 per cent for private occupiers.

Separate ONS figures published this summer showed that the average house price in England was 8.4 times the average income in the year ending March 2022.

This is a slight improvement from the previous year, when the affordability index reached 8.7.

But it still means housing is only half as affordable as it was in 1999, when the average home could be purchased for 4.4 times the median income.