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Should first-time buyers choose a 30 or 35-year mortgage?

One in six borrowers have mortgage terms of 35 years or longer

M&S Bank has increased its maximum mortgage term to 35 years, but should first-time buyers really take a loan out for such a long period?

Data from the Bank of England shows that 16% of mortgages now have terms of 35 years or more – that’s up from just 5% a decade ago.

And with cash-strapped first-time buyers increasingly needing to make their finances go further, some banks are even offering loans lasting 40 years.

Here, we take a look at the new deals from M&S Bank and explain what’s going on in the mortgage market, including which banks offer the longest mortgage terms.

  • If you’re thinking of buying your first home and need some expert advice on your mortgage options, call Which? Mortgage Advisers on 0800 197 8461.

M&S Bank offers 35-year cashback deals for first-time buyers

The new 35-year mortgages from M&S Bank are available to buyers with a 5% deposit, and reflect the difficulties first-time buyers are facing when trying to finance their property purchases.

The new products come with £1,000 cashback, and are available for up to four borrowers taking out the loan together, reflecting how many single buyers now need to join with friends or siblings to buy a home.


How do the new M&S Bank deals compare?

These deals from M&S Bank don’t compare favourably with their competitors in terms of headline initial rates, but they do come without application fees and with the bonus of £1,000 cashback.

This, coupled with M&S Bank’s low standard variable rate (SVR), means the overall cost for comparison (APRC) of these products is considerably better than many competitors.

But in truth, whether the new M&S Bank mortgages are right for you depends on your cash flow situation.

Buyers who can’t afford large upfront mortgage fees and need the cashback in their pocket might consider the higher initial rate charged by M&S Bank a worthwhile expense.

On the other hand, some borrowers may prefer to pay out more up front but get a lower rate of interest over the fixed term.

See how they compare below (links take you to the deals on our comparison site, Which? Money Compare).

95% mortgages

New M&S Bank 35-year deals:

Product Initial rate Fees Cashback Revert rate APRC
Two-year fixed 3.79% £0 £1,000 3.94% 4.0%
Five-year fixed 3.99% £0 £1,000 3.94% 4.0%

Cheapest 35-year deals at 95% loan-to-value by initial rate*:

Product Lender Initial rate Fees Cashback Revert rate APRC
Two-year fixed Post Office Money 3.08% £0 £0 4.74% 4.5%
Five-year fixed Post Office Money 3.58% £0 £0 4.74% 4.4%

*Mortgage data from Moneyfacts. Accessed 22 August 2018. Only deals available to first-time buyers have been included.

90% mortgages

Buyers who can save a little more can benefit from significantly cheaper rates, with the M&S Bank deals for people with a 10% deposit coming in at 1.2%-1.3% cheaper than their products for those with a 5% deposit.

New M&S Bank 35-year deals:

Product Initial rate Fees Cashback Revert rate APRC
Two-year fixed 2.49% £0 £1,000 3.94% 3.8%
Five-year fixed 2.79% £0 £1,000 3.94% 3.5%

Cheapest 35-year deals at 90% loan-to-value by initial rate:

Product Lender Initial rate Fees Cashback Revert rate APRC
Two-year fixed HSBC 1.79% £999 £0 3.94% 3.7%
Five-year fixed HSBC 2.34% £999 £0 3.94% 3.4%

How common are 35-year mortgages?

Data from the Bank of England shows how a steadily increasing number of buyers are taking out longer-term mortgages.

While the below figures are only available up to September 2017, they show how mortgage terms of more than 30 years have increased in the last decade, while traditional 25-year terms have seen their market share significantly eroded.

That doesn’t mean that super-long-term mortgages of up to 40 years are set to take off in a big way, though.

Data from UK Finance has shown that only 3-4% of mortgages granted in the last few years have been for terms of 36 years or more.

Maximum terms offered by mortgage providers

Lenders are certainly responding to homeowners’ needs for longer-term mortgages. Which? analysis of Moneyfacts data has found that all major mortgage lenders are offering 35-year mortgages to first-time buyers, and some are offering 40-year deals.

Remember that this is just an indication of what products might be on offer, and being granted a loan with such a long term will depend on your age and financial circumstances.

Should you choose a 35-year mortgage?

As with all borrowing, whether a longer-term deal is right for you depends on your financial circumstances.

As well as affordability, you need to consider how quickly you can pay off your mortgage, and what age you realistically want to be mortgage-free by.

Some buyers prefer lower monthly payments for a longer period, while others would rather pay more now and settle their mortgage more quickly.

Our tips:

  • If you’re signing up for a fixed-rate mortgage, make sure you switch deals before you end up on your lender’s SVR.
  • Select a mortgage with no penalties for overpayments.
  • Consider whether saving for a bigger deposit and getting a mortgage a few years later might be the better option.

How to get advice on your mortgage options

With thousands of deals on the market, finding the right mortgage can be a complicated business.

That’s where an independent, whole-of-market mortgage broker can help. For a free call back from an impartial adviser, simply fill out the form below.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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