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Term extensions

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 15. July 2023

Looking to speak to mortgage brokes about term extensions.

  • Were you seeing more people take them up? How much could someone save? 
  • Do you think it will get more popular due to the Mortgage Charter? 
  • What should borrowers keep in mind about extending terms?

 

7 responses from the Newspage community

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Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
In the current climate of trying to minimise clients' mortgage payment hikes on a remortgage, one tool that is available for most borrowers is to increase the length of the term to reduce the monthly payments. For borrowers where the extended term will still finish before their planned retirement age, the main consideration is the additional interest payable over the extended term, but the clients could shorten the term in the future again or over-pay should their finances allow. What is a growing concern however is the number of borrowers looking to extend their mortgage term into their 70s to keep repayments now affordable which, if not corrected on future remortgages or by overpayments, creates a time-bomb for the future where suddenly many people are struggling to pay their mortgage on reduced retirement income and end up having to sell their homes.
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Russell Maggs
Mortgage & Protection Adviser at Maggs Financial Services
I'm not seeing a marked increase in clients wanting to extend their mortgage term. Instead clients are focusing on managing their budget more effectively and taking greater ownership over their monthly expenditure.

I don't think term extensions will get more popular due to the mortgage charter. It would be a case of many people chosing the easy route and kicking the can down the road, rather than tackling their budgeting head on.

Brokers should be wary that customers struggling with monthly payments are vulnerable. And an enhanced level of service and due dilligence should be applied.
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Gareth Davies
Director at South Coast Mortgage Services
We've certainly had more requests to consider term extensions, but the reality is that when it's looked at in detail, the saving per month is usually minor and isn't justified. Most tend to stick with their existing term.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
When a client or a prospective client tells me they tell me they are struggling with the increase in their mortgage payments, then looking at an extension to their term on a repayment mortgage is high up on the list of levers to pull. It can reduce the repayments to something more manageable, but unlike converting some or all of the debt to interest only, it still keeps the security of knowing the mortgage will be cleared by a certain date. Sometimes these conversations may require a client to rethink their retirement plans, in order to get the level of extension that they need at the moment, but I am always at pains to point out this is not set in stone and we can always look to shorten the term again at a future mortgage review; maybe if rates come down again, their outgoings reduce in another area, or they get a pay rise.
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
Extending a term just kicks the can down the road. People are definitely wanting to have conversations about this more often right now. Problem is that it's a drug we don’t want people to get hooked on... they’ll end up paying lots more in interest which is disheartening to say the least.

Having said all that, it can be a useful tool, used in moderation. In the current climate, any help with monthly payment rises is welcome.
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Rachel Davidson
Director & Mortgage Broker at The Mortgage Store Grimsby
I am starting to see people ask for term extensions on their remortgages due to the fixed rate interest rates now at around 6%, not so much before. How much they will save is very much individual and depends on how long they have left to their state or projected retirement. The Mortgage Charter may play a part in this becoming more popular as people realise there is help available from lenders if they are struggling, provided they have been making their payments on time. Borrowers need to keep in mind that they can reduce the term again if the interest rates improve by their next remortgage, or after 6 months and should do this, so that they dont end up working to pay their mortgage off at an age older than they had initially planned. It should be a temporary measure.
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Stuart Borthwick
Owner (later life lending specialist) at Dartmoor Financial llp
We're seeing several calls from clients wanting to or having to jump to 50+ retirement mortgages as well as Retirement Interest Only mortgages - both of which benefit from longer or "never-ending" terms. Clients intend to reduce the amount they "have to pay monthly" and then "overpay when they can" as a solution to struggling with the ever-increasing costs of living and keeping themselves to the lifestyle they are accustomed to. Surely we all want clients to clear their mortgages as soon as they can rather than keep loans secured on their houses long term? Assuming they have the means of course!