HSBC joins a number of mortgage lenders in extending its maximum mortgage term to 40 years. 'Marathon mortgages' are becoming more sought after as aspiring homeowners look for alternative ways to lower their monthly mortgage repayments and meet strict affordability rules.
HSBC will start offering 40-year mortgage deals for those applying through a mortgage intermediary from 30th August 2023. Those applying directly through HSBC will be able to access 40-year mortgage deals from 13th September 2023.
Why long-term mortgages are in demand
The Bank of England has raised the base rate of interest a number of times in recent months in an effort to curb rising inflation, which in turn has caused mortgage rates to rise.
Moneyfacts.co.uk recently reported that mortgage interest rates have jumped from an average of 2.59% on a 2-year fixed-rate mortgage deal in June 2021 to over 6% in June this year, meaning tougher affordability rules and higher monthly repayments for most.
One of the most effective ways to reduce monthly repayments and help meet affordability criteria is to increase the term of a mortgage, thereby spreading mortgage repayments over a longer period. Indeed, this was one of the measures included in the Government's Mortgage Charter.
Head of mortgages at HSBC, Andrew Matson stated that, “We know that home ownership is a key life ambition for many people, but affordability can be an issue. Introducing our first-ever 40-year mortgage term 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.”
How will HSBC's 40-year mortgage term affect monthly repayments?
Borrowers should be mindful that while a longer mortgage term could reduce their monthly mortgage repayments, it is likely to increase the overall cost of the mortgage loan as it accrues more interest over the additional years.
40 year vs 25 year mortgage term compared
| Mortgage term | Monthly mortgage repayment | Total interest paid over the term of the mortgage |
| 25 years | £1,169.18 | £150,754.02 |
| 40 years | £964.39 | £262,908.74 |
*based on a £200,000 repayment mortgage loan at a 5% interest rate charge over the whole term
Based on the example above, a 40-year mortgage would save you just over £200 per month when compared to a 25-year mortgage term, however, it would increase the overall cost of your mortgage loan by over £112,000 by the time it is repaid. This example demonstrates the importance of considering the overall cost of your mortgage and why it is important to seek independent mortgage advice*. Alternatively, you can find the best mortgage deals in our regularly updated article 'Best mortgage rates in the UK'.
Which lenders offer a 40-year mortgage term?
Mortgages arranged on an interest-only basis are usually limited to 25 years meaning 40-year mortgage terms are generally limited to mortgages arranged on a capital and interest basis, otherwise known as repayment mortgages. Lenders that offer a 40-year mortgage term include:
- Lloyds Bank
- Santander
- Nationwide
- Barclays
- Royal Bank of Scotland
- First Direct
- Yorkshire Building Society
- Natwest
Pros and cons of a 40-year mortgage term
Pros
- Lower monthly mortgage repayments
- Can be easier to meet strict affordability criteria
- Can help first-time buyers to get onto the property ladder
Cons
- The overall cost of the mortgage is often higher than shorter-term mortgages
- Could mean you have to work for longer if the term exceeds your planned retirement age
How to find the best mortgage term for your needs
While a longer mortgage term could help you reduce your monthly repayments, this will often come at the expense of higher mortgage costs overall. You should always consider speaking to an independent mortgage specialist as they can help you to work out the best option for your individual circumstances, as well as gain access to a wider range of mortgage deals.
If you do not have a mortgage broker, you can find one using the services of VouchedFor*. The online directory provides you with a list of local mortgage brokers and lending specialists to choose from, each with customer reviews, qualifications and specialisms to help guide you. Additionally, online mortgage specialist Habito* can provide tailored advice, accessing over 90 lenders' deals to find you the one that fits your needs.
Alternatively, you can search for mortgage deals using our mortgage rate comparison tool which allows you to tailore your search for your specific borrowing needs.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor
