HSBC is to introduce a ‘marathon’ 40-year mortgage tomorrow, hoping to attract customers who might struggle to meet the monthly payments for a shorter offer, and who are willing to be tied down to an extra-long deal.
The 40-year term will be offered for both residential and buy-to-let mortgages. Initially it will be available via brokers, before becoming available direct from HSBC on 13 September.
Andrew Matson, Head of Mortgages at HSBC UK said the deal would get more people on the housing market: “We know that home ownership is a key life ambition for many people, but affordability can be an issue. We are delighted to introduce our first ever 40-year mortgage term to our customers. This move underscores our commitment to supporting aspiring homeowners in their journey onto the housing ladder.
“By extending the mortgage term we aim to help make mortgages more manageable with lower monthly repayments and homeownership a reality for our customers.”
It comes as “marathon mortgages” become an increasingly popular phenomenon, as rising interest rates make it harder for some prospective buyers to afford a 20- or 25-year deal and first-time buyers look for a way out of the rental trap.
While monthly payments are lower with the longer mortgage, the total amount paid over its course ends up being significantly higher, due to the compounding effects of interest over time.
Smaller lenders have offered 40-year mortgages before, but today’s announcement from a member of the the “big six” may be seen as a turning point in ultra-long mortgages entering the mainstream.
Lewis Shaw, Owner and Mortgage Expert at Shaw Financial Services, noted that HSBC was catching up with the market by offering longer deals.
He said: “40-year mortgages are nothing new, and this brings HSBC in line with most of the mortgage market.
“It shows that there is an appetite for longer mortgages after the cost of living crisis, rate hikes, and wage stagnation wrought a hammer blow to first-time buyers’ affordability, and HSBC wants in on the action. What it also highlights is the disparity between average house prices and income, where people now have to borrow over this timeframe to take their first step onto the property ladder.”
Elliott Benson, owner and mortgage broker at Sett Mortgages, said that HSBC tends to be among the cheapest lenders for first-time buyers, so the deal could represent a particularly affordable offering for those looking for a longer deal.
The number of first-time buyers taking out 35-year-plus mortgages in 2023 was 19 per cent. In 2005, when UK Finance began their records, it was just two per cent.