Marathon mortgages: What are they and are they here to stay?

Mortgage products in the UK are designed to cater to diverse needs. One type of product that’s gaining traction is the marathon mortgage. In this blog, we will be discussing exactly what these products are and why they are a hot topic in 2024. These long-term loans promise to make homeownership more accessible, but are they just a fleeting trend or a lasting shift in the market? Let’s break it down.

Marathon mortgages are essentially long-term home loans, typically spanning at least 30 years. Unlike traditional 20 or 25 year mortgages, these extended-term mortgages aim to lower monthly payments, making them more manageable for borrowers. The idea is to stretch the repayment period and reduce the financial strain in the short term.

The appeal is clear: lower monthly payments mean more breathing room in borrowers’ budget, potentially making homeownership more achievable in a time of high interest rates and property prices.

Extending the term means potentially increasing the total amount of interest that will accumulate over the total life of the loan. It also means that building up equity in the property could take longer as in the early years of the mortgage a larger portion of the monthly payment will be going towards paying interest as opposed to paying off the original amount borrowed.

Increasing the term past the state retirement age can also come with further checks to ensure the borrower has the capability to pay the mortgage once they have retired. This can often be done in the form of producing pensions statements for private pensions or evidence that monthly contributions are being made – although different lenders have different criteria so it’s important to have your adviser workout what will be required before making a decision.

Borrowing large sums for extended periods can be particularly daunting for younger borrowers, who are often the primary target for these products. The emergence of longer-term mortgages is hardly surprising amidst high interest rates and property prices.

So, are 30+ year mortgages here to stay? The answer is yes, at least for now. Property prices have remained somewhat resilient to increased borrowing costs. The risk lies in the fact that if interest rates drop significantly, property prices could rise even further.

Should you personally consider a 30+ year term on your next mortgage? Well, as we have alluded in our short analysis – the answer of course depends on your personal circumstances. As mortgage advisers, our responsibility is to thoroughly analyse each client’s unique circumstances and ensure the mortgage term is appropriate, enabling them to achieve their long-term property ownership goals.

If you are considering the options for your next mortgage, we’re here to help. Our team is dedicated to understanding your unique financial situation and guiding you through the complexities of the mortgage process.