Mortgage warning as attempt to cut monthly payments could cost Britons £177,000

Someone borrowing £250,000 could repay as much as £660,432 if their mortgage runs for 40 years, compared with £483,324 if it is cleared within 25 years, according to Moneyfactscompare.co.uk. The figures are based on an interest rate of six per cent.

Extending the same £250,000 loan from 25 to 40 years adds £140,330 to repayments at five per cent interest and £122,472 at 4.5 per cent.

Sam Fox, from the UK Mortgage Centre, said longer terms have become a reality for many first-time buyers struggling with affordability.

He told GB News: “Marathon mortgages have become a fact of life for many first-time buyers, and it’s not hard to see why.

“With house prices still stretching affordability, extending the term is often the only way to make the monthly repayments work today. But borrowers need to go in with their eyes open.”

One concern is that taking on a longer term could leave some homeowners still paying their mortgage after they stop working.

Mr Fox explained that borrowers expecting to make repayments into their 60s or 70s may need to show lenders that their pension income will be enough to cover the mortgage, rather than relying solely on their current salary.

However, taking out a 35 or 40-year mortgage does not necessarily mean borrowers have to keep that term for decades.

If their finances improve, homeowners may be able to overpay their mortgage or ask their lender to shorten the term, allowing them to clear the debt sooner and reduce the amount of interest they pay overall.

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Mr Fox said: “Most lenders allow overpayments, usually up to 10 per cent of the balance each year without penalty, and you can normally request a term reduction once your finances improve, say after a pay rise or when a shorter-term outlay like childcare costs falls away.

“Reviewing your mortgage every couple of years, rather than leaving it on autopilot, is the real safeguard here.”

The warning comes as research from Royal London shows how many people already expect housing costs to follow them into retirement.

Around 16 million UK adults expect to still be paying for housing after they stop working, with 39 per cent saying they do not know how they will afford their rent or mortgage.

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Almost four in 10 mortgage borrowers do not expect to have paid off their home by retirement, although just seven per cent believe they will still be making mortgage payments more than 10 years after they stop working.

Younger adults are particularly likely to face housing costs later in life. Some 44 per cent of people aged 18 to 34 expect to have rent or mortgage costs in retirement, compared with 24 per cent of those aged 50 to 69.

The research also highlights the potential pressure housing costs could place on retirement finances.

People who expect to have housing costs after they retire have an average pension pot of £34,948, compared with £120,682 among those who do not. Average pension savings across everyone surveyed stood at £93,221.

Sarah Pennells, Consumer Finance Specialist at Royal London, said: “For generations, reaching retirement often meant reaching the point where housing costs were behind you. But for millions of today’s retirees and future retirees, that simply isn’t the reality.”

“Housing costs can make a huge difference to how far retirement income will stretch. Understanding what your housing costs could look like in later life can help you develop a more realistic picture of the income you’ll need in retirement.”