An increasing number of first-time buyers in Cornwall are taking out a mortgage that will last 35 years or more. More than a third of those buying the
An increasing number of first-time buyers in Cornwall are taking out a mortgage that will last 35 years or more.
More than a third of those buying their first home in the TR postcode are resorting to the long term mortgages, according to Trinity Mirror data unit findings.
Ten years on from the failure of Northern Rock, which came as a result of financial problems caused by the subprime mortgage crisis, mortgages at 95% or above are now rare. However, bigger mortgages on longer terms are growing as property prices continue to rise.
In 2016, 34.3% of mortgages taken out by first time buyers in the TR postcode, 409 out of 1,191, was for a term of 35 years or longer. The proportion has soared further in the first quarter of 2017 to 37.4%.
This is up from 15.7% in 2006, according to figures released following a Freedom of Information to the Financial Conduct Authority, which regulates the financial sector.
Among first time buyers in the area, 10.2% took out a mortgage that was 4.5 times their income or bigger in 2016, this compares to 12.8% in 2007, just as the financial crash hit.
Andy Goundry director at Goundrys estate agents in Truro put this into perspective, he said: “It’s very common now for first time buyers to take out a mortgage of at least 30 years.
“What we’re also seeing is that some are almost too old for a 30 year mortgage, with the average age of first time buyers now being 37.”
Despite buyers entering the property market with a mortgage set to last them sometimes into their 70s, it isn’t putting them off making a purchase. Andy said: “It’s having no detrimental impact on the number of first time buyers.
“Buyers see it as affordable and rather than worrying that they will never pay it off, many tend to enter with the thought that their salaries may increase in the future, or they may be helped by inherited finances.”
Providing some advice for first time buyers, Andy said: “Make sure you sort your finances out first,” highlighting that many enter the market setting their sights on a certain property, forgetting to take into account aspects of their outgoings, and therefore having to settle for something a little different.
The Trinity Mirror report adds that lenders are limited to lending mortgages of this size to no more than 15% of customers in each quarter. In 2016, 8.1% of mortgages in the TR postcode were this size, and this has grown to 8.6% in the first quarter of 2017.
Overall, one in 12 first time buyer loans in 2016 (8.4%) were at high income multiples (4.5 times or more), a high loan to value (90% or higher), and over a longer term (30 years or more). These types of loans rose to 10.2% of the market in 2013 compared to 8.1% in 2007.
Across the UK in 2016, 28.1% of mortgages taken out by first time buyers, 87,676 out of 312,497, were for a term of 35 years or longer.
The proportion in the first quarter of 2017 rose further to 30% – up from 13.8% in 2006.