Mortgage borrowers can save £255 per month by opting for a 40-year mortgage term over a 25-year term, research shows.
According to Moneyfacts, assuming a borrowing amount of £250,000 at a rate of 5.05%, a longer 40-year mortgage term can give borrowers the flexibility to cut their mortgage costs.
Moneyfacts said taking a longer mortgage term could be a “lifeline for those struggling to afford payments”.
Borrowers on a 40-year mortgage term can choose to overpay their mortgage when they can afford to, so they can reduce their mortgage term without having to pay high repayments every month.
For instance, a regular overpayment of £200 per month on a £250,000 mortgage can take almost 13 years off a 40-year mortgage term and save over £123,000.
Recent figures from a Freedom of Information request sent to the Financial Conduct Authority (FCA) by Quilter found that in 2024, the number of borrowers aged 36-plus taking out a term of 35 years or more came to 30,338, up from 8,629 in 2019.
This was echoed by research from Sprive, which found that not only were first-time buyers getting older, they were also taking out longer mortgage terms.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said as consumers work for longer, it’s easy to see why the majority – 85% – of mortgages allow them to push their mortgage term to 40 years.
“Those prioritising their homeownership plans over their pension may well choose a longer-term mortgage to more comfortably afford mortgage payments. However, being asset rich and cash poor in retirement can lead to borrowers paying their mortgage for longer, incurring more interest, and eventually they may turn to equity release to boost their disposable income.
“One way new buyers could afford monthly mortgage repayments would be to choose a longer term. However, those monthly savings come at a cost and borrowers with lengthier mortgages will make monthly repayments for longer and incur paying considerably more mortgage interest overall, so making overpayments to reduce the term and interest incurred is wise,” she said.
Springall said a maximum mortgage term of 25 years would have been “relatively standard in the past”, especially as house prices were lower, but around 68% of first-time buyers are now taking out mortgages with a term of 30 years or more, according to the FCA.
“Affordability remains a key issue and it’s stretching new buyers, with the Bank of England noting the average deposit paid by first-time buyers was around 60% of their household income in 2024.
“The latest reviews into stress testing are important, and the legacy of these tests are designed to protect borrowers, but it’s important loan-to-income (LTI) tweaks are considered to be reflective of the changing mortgage market. It is understandable that renters may want to take the leap into homeownership, especially when Zoopla revealed that average rents are up £221 per calendar month over the last three years.
“However, the demand for affordable housing remains a crippling issue for new buyers, which is why they will be hoping the government can make its ambitious target of 300,000 homes to be built each year a reality,” she concluded.
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