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Young homebuyers adapt to soaring property prices

Affordability challenges in the housing market have prompted significant changes in the strategies employed by young home buyers. Recent research conducted by credit reference agency Experian sheds light on a new trend: an increasing number of young individuals are opting for longer mortgage terms.

This shift has led to the emergence of what is now being called the "Mort-locked" generation, as coined by Experian. These buyers, while benefiting from lower monthly repayments, may face the prospect of prolonged mortgage payments and increased overall interest costs.

Experian's data reveals a significant shift in the preferences of young home buyers. 1 in 4 mortgage holders aged under 30, who initiated their loans earlier this year, have chosen extended mortgage terms of 35 years or more. This is up from 1 in 10 in 2020, an increase of 150%.

The UK House Price Index saw the average house price rise by 0.5% in July 2023. High property prices, rising living costs and elevated interest rates have contributed to the affordability crisis faced by young buyers. Experian's findings suggest that many are turning to longer mortgage terms as a strategy to manage their monthly repayments and make homeownership more accessible.

Experian's analysis provides valuable insights into the evolving dynamics across the property market. The data indicates a 28% decrease in mortgage applications in July compared to the same month in the previous year. This trend may be attributed to people choosing to stay in their current homes or opt for renting due to the prevailing high interest rates on mortgages. Additionally, mortgage applications for first-time buyers have declined by 19% annually.

For mortgage brokers, the rise of longer mortgage terms among young home buyers underscores the importance of staying attuned to shifting market trends. Brokers play a crucial role in guiding clients through the complexities of mortgage selection, and understanding the preferences of the "Mort-locked" generation is vital.

Brokers should be well-equipped to advise clients on the pros and cons of extended mortgage terms, helping them make informed decisions that align with their long-term financial goals.