Story for The Times: Is there anything wrong with "marathon mortgages" ?

We've definately seen this trend as a measure for cashflow, it may be easier to chat around this subject if you wanted to give me a call 02073172830

Absolutely it’s a trend, and with good reason. With interest rates having been at the level they’ve been for around 18 months now, it’s inconceivable to expect the standard, old school ‘25 year term’ to be considered affordable for many buyers anymore. I make sure I always have a robust conversation around budget, and term, and what that means with regards to interest paid and how long before you really start eating into capital. But many have simply no choice.

When reviewing a client’s mortgage I would always speak with them around term and potential reductions, but we’re in an environment at the minute which makes only a very small percentage of people able to consider reducing their term.

Good morning, I’d be more interested from a regulatory and compliance point of view if these mortgages actually the best type of mortgage for these individuals or are they the cheapest for their monthly outgoings? Are brokers advising these mortgages as an easier sell to the consumer? Are brokers pushing consumer to stretch themselves sensibly thinking about the longer term impact of interest rates rather than the short term monthly saving on the monthly payment. I’m sure lots of brokers are operating as expected within the regulated boundaries however it feels from the stat there could be brokers looking at the easier sell to gain a bit of extra commission maybe? Times are hold for lots of groups of people and everyone I’m sure are looking at ways to bring in extra income including brokers. I hope the risks of these longer term mortgages are being outlined for example of the property was to go into negative equity and the impact of that on the consumer being tired to a long term deal.

As a means to helping first time buyers get onto the property ladder, 35 and even 40 year mortgages do have a place.
Incomes will grow and clients could then develop the ability to start to overpay
the mortgage and thus help to reduce the original mortgage term.
This is where a broker comes into their own - actively keeping in touch with the clients - helping to review the mortgage every 2,3 or 5 years, and showing the benefits of overpayments made to the mortgage.
The nice thing about a longer term, with voluntary overpayments is that it leaves clients slightly more in control of the mortgage - i.e. they could suspend a voluntary overpayment if a large unexpected bill came along - rather than have to go "cap in hand" to a lender and ask for a mortgage term to be extended to help out.
The danger is a nice car, nice holiday or XYZ comes along and a client then doesnt make the overpayments - BUT - again regularly reviewing the mortgage with a professional makes sense here.

For those that look at longer terms, it is sensible as you want to make sure you can budget accordingly, especially with interest rates being much higher now.

Generally, we find that clients who have a longer term will overpay the mortgage with ad hoc payments when they receive a bonus or have surplus savings.

The downside is that if you have the mortgage over a longer term and do not overpay, there will be more interest payable.

Gone are the days of 25 year mortgages for the average FTB. It's simply not affordable for many given the current average house price and certainly when factoring in current interest rates too. You often find the older generations pouring scorn on anything above 25yrs, but the fact is that back in the day many lenders didn't offer any longer than this. Had they done so, I guarantee some borroers would have taken them up.

Extended mortgage terms have mainly come about as lenders are forced to use affordability as one of their main criteria when assessing mortgage applications. The growing rift between increasing house prices and real incomes has meant first time buyers in particular need to extend their mortgage terms to get on to the property ladder. As an adviser our key goals are to get the borrower the loan amount they need and most importantly to ensure this is affordable to them. We always re connect with clients on a regular basis to see if there is the possibility to reduce the term or loan. The situation at present is that terms have actually been extended as increased rates have resulted in increased monthly payments. The bigger question we need to be asking is what is wrong with extended terms? We seem to be stuck in an approach to property and mortgages from the '50's. In other European countries such as Sweden, lifetime mortgages or terms of 50+ years are relatively normal.

It used to be that 25-30 year terms the norm. Now 35-40 years are. It's the main reason why as a nation we're getting poorer. Paying tens of thousands of pounds in additional interest payments is not a plan for economic growth. Nor it is fair on the next generation faced with a lifetime of paying debts from mortgages and student loans. Until we wake up and commit to policies that prevent runaway house price inflation: social housing, including property values in the 2% inflation target, ending the right to buy and so on, the UK will remain in its economic malaise.

I'm not overly concerned if that is the right advice for the client and as long as the mortgage is cleared before a normal retirement age and those clients are encouraged to overpay and clear their mortgage quicker where they can. Even a few hundred pounds a month could clear many mortgages over a decade quicker and save customers tens of thousands of pounds in interest.

Your mortgage is as long as your fixed rate - outside of that the longer terms allow more front end access to the property market.

Yes longer term mortgages mean more interest charges but if circumstances allow you’ll have numerous opportunities to review that initial marathon mortgage term along the way.

Long-term (Marathon) mortgages are purely down to the maths - with the price of properties, especially in the South, repaying such chunky loans often needs to be stretched to a longer term of say 35/40 years. I can remember applications for first-time buyers having a default position on our systems as 25-year term - since the noughties arrived this has stretched out further and further. There is nothing wrong with the length of initial term of mortgages as long as at the next review with their financial advisers the consumer takes the advice, once payrises have been banked, to shorten the term over time - saving interest costs in the long term.

There's nothing wrong with "marathon mortgages" as a product, it's more about how borrowers decide to use and manage them. For many, it could be the only realistic option to buy their first home. People need to understand the implications with regard to interest payable over the long-term, and some thought should be given to how they might feel 10 years down the line. We're hard-wired to make short-term financial decisions and it's easy to neglect our future selves. Providing marathon mortgages are reviewed regularly as part of an overall financial plan, they could be a valuable solution to an increasingly difficult housing situation in the UK.

While "marathon mortgages" might seem like an attractive option for some first-time buyers seeking affordability, it's essential to carefully consider the potential drawbacks, particularly the significant increase in total interest paid over the extended term. Seeking professional financial advice and thoroughly assessing individual circumstances are crucial before embarking on such a long-term financial commitment.