FCA says new buyers may pay far more interest as they have to take out longer mortgages than previous generations
First-time buyers could pay nearly 50% more than existing home owners for their property because typically they are spreading their mortgage repayments for longer periods of over 35 years.
According to analysis by the Financial Conduct Authority (FCA), which has scrutinised 10 years of mortgage data, taking out a £200,000 home loan for 35 years rather than 25 years at a 3% interest rate requires £38,723 more (46%) in interest payments.
First-time buyers are older on average than they were decade ago as they have been forced to wait longer to get on the housing ladder because of rising house prices and low income growth, the FCA found.
“While increasing the mortgage term can make monthly repayments more affordable, ultimately the borrower is likely to repay a greater amount of cumulative interest over the life of the mortgage,” the regulator said.
Lending to first-time buyers is strongest part of the market