Minimising the Monthly Cost of a Mortgage

Following the withdrawal of most interest only mortgage options from the market, there is evidence that the average repayment period for residential mortgages has increased significantly. Mortgage applicants are seeking to minimise their monthly payments by stretching the loan period towards the 40 year term offered by some mainstream providers.

Interest only mortgages were the preferred choice for many first time buyers because the monthly costs are so much lower. However following restrictions introduced by the FCA, the availability of these mortgages, particularly for those potential homeowners with small deposits, has been much reduced.

As a consequence, most mortgages are now taken out on a repayment basis. In the past, the normal repayment period was between 10 and 25 years with only 5% of loans being extended for a period longer than 30 years.

Due to higher house prices necessitating larger mortgages, and the tough affordability regulations recently placed upon Lenders, it has become increasingly difficult for first time buyers to get on the housing ladder. Thus prospective homeowners are looking at ways of minimising their monthly costs by extending the mortgage repayment period beyond 30 years.

Indeed, during the second quarter of this year, the Council of Mortgage Lenders (“CML”) has revealed that as many as 20% of loans were taken out for a term of longer than 30 years. Furthermore, the CML have reported that over 5% of re-mortgages are also now taken out on terms of more than 30 years.

In order to learn about the availability of residential mortgages with longer repayment periods, which enable thereby the monthly mortgage costs to be minimised, it is advantageous to discuss the options with an impartial adviser company like Bower Mortgages who have access to the whole of the market.