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 any period of time?
Data in the Bank of England implies 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 having to make their finances go further, some banks are even offering loans lasting 4 decades.
Here, we take a look at the brand new deals from M&S Bank and explain what’s going on within the mortgage market, including which banks provide the longest mortgage terms.
M&S Bank offers 35-year cashback deals for first-time buyers
The new 35-year mortgages from M&S Bank are for sale to buyers having a 5% deposit, and reflect the down sides first-time buyers are facing when trying to finance their home purchases.
The new products come with lb1,000 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 purchase a house.
How perform the new M&S Bank deals compare?
These deals from M&S Bank don’t compare favourably using their competitors in terms of headline initial rates, but they are available without application fees and with the bonus of lb1,000 cashback.
This, coupled with M&S Bank’s low standard variable rate (SVR), means the total cost to compare (APRC) of those 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 want the cashback within their pocket might think about the higher initial rate charged by M&S Bank a worthwhile expense.
On the other hand, some borrowers may would rather pay out more in advance but obtain a lower rate of interest over the fixed term.
See the way they compare below (links get 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% | lb0 | lb1,000 | 3.94% | 4.0% |
Five-year fixed | 3.99% | lb0 | lb1,000 | 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% | lb0 | lb0 | 4.74% | 4.5% |
Five-year fixed | Post Office Money | 3.58% | lb0 | lb0 | 4.74% | 4.4% |
*Mortgage data from Moneyfacts. Accessed 22 August 2022. Only deals available to first-time buyers have been included.
90% mortgages
Buyers who are able to save a bit more can benefit from significantly cheaper rates, with the M&S Bank deals for people with a 10% deposit weighing 1.2%-1.3% cheaper than many for those having a 5% deposit.
New M&S Bank 35-year deals:
Product | Initial rate | Fees | Cashback | Revert rate | APRC |
Two-year fixed | 2.49% | lb0 | lb1,000 | 3.94% | 3.8% |
Five-year fixed | 2.79% | lb0 | lb1,000 | 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% | lb999 | lb0 | 3.94% | 3.7% |
Five-year fixed | HSBC | 2.34% | lb999 | lb0 | 3.94% | 3.4% |
How common are 35-year mortgages?
Data from the Bank of England shows the way a steadily increasing number of buyers take out longer-term mortgages.
While the below figures are only available up to September 2022, they reveal how mortgage terms of a lot more than 3 decades have raised in the last decade, while traditional 25-year terms have experienced their share of the market significantly eroded.
That doesn’t imply that super-long-term mortgages as high as 4 decades are set to take off greatly, though.
Data from UK Finance has shown that just 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 extremely responding to homeowners’ needs for longer-term mortgages. Which? analysis of Moneyfacts data finds that all major mortgage lenders are offering 35-year mortgages to first-time buyers, plus some are offering 40-year deals.
Remember this is just a sign of the items products may be on offer, and being granted a loan with such a long term is determined by your age and financial circumstances.
Should you choose a 35-year mortgage?
As with all of borrowing, whether a longer-term deal fits your needs depends upon your financial circumstances.
As along with affordability, you need to consider how fast you are able to pay off your mortgage, and what age you realistically desire to be mortgage-free by.
Some buyers prefer lower monthly payments a bit longer, while others prefer to pay more now and settle their mortgage more quickly.
Our tips: