Record numbers of 35-year mortgages taken out amid high inflation

Almost one in five took out a longer mortgage In March, the highest proportion since records began in April 2005, according to data from trade association UK Finance.

This has more than doubled in a year, with only 9 per cent of first-time buyers taking out mortgages lasting more than 35 years in March 2022, compared with 2 per cent in 2005.

Longer mortgage terms can make monthly payments more manageable, but borrowers can end up paying more in interest.

Mortgage rates have been rising as the Bank of England base rate has climbed.

Swap rates, which underpin fixed-rate mortgages, have been fluctuating recently amid expectations for inflation. There was also a jump in mortgage rates last autumn as the markets reacted to the mini-budget.

Stubborn inflation, particularly over the price of food, has seen the Bank’s Monetary Policy Committee (MPC) raise interest rates for the 12th time in a row last month, taking the level to 4.5 per cent.

Andrew Bailey, the Bank governor, defended the institution against criticism it had lost the confidence of the public over its interest rate decisions.

“I think there are some very big lessons in how we operate monetary policy in the face of very big shocks. Because the shocks that we have faced have been unprecedented,” he said.

Last month Jeremy Hunt, the Chancellor, backed further interest hikes even if they risk a recession.

“We have to support the Bank of England in the difficult decisions that they take,” he said.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “Anyone who bought after the rate hikes of the late 1980s won’t have had to deal with rises at this kind of speed before, so there’s a risk they won’t have factored it into their plans at all.”

It comes as Yorkshire firms look set to buck the trend of poor performances across the country which continues to struggle with high costs related to inflation.

Both Leeds and Sheffield have ranked in the UK’s “top 10 growth cities” according to research from the retail estate end investment firm CBRE.

Ram Rasiah, Senior Director, CBRE said; “It’s great to see two Yorkshire cities in the top 10 list.

“Retail continues to adapt to changing consumer habits and repositioning the role of the store.”

Birmingham took the top spot for retail followed by Bristol and Manchester respectively.

Jennet Siebrits, UK Head of Research at CBRE said: “Leeds, which has one of the most diverse economies in the UK, ranked particularly well in the office and retail sectors and Sheffield was ranked among the highest cities respectively for projected growth in the urban logistics sector, which has undergone a period of supply chain diversification to keep up with accelerated online retail activity and consumer expectations since the pandemic.”

However, across the country, May’s trio of bank holidays failed to get shoppers spending as sales growth slowed to its lowest level in six months, according to new figures.

Total UK retail sales increased by 3.9 per cent last month, against a decline of 1.1% in May 2022 and below the three-month average growth of 4.7%, according to the BRC-KPMG Retail Sales Monitor.

British Retail Consortium chief executive Helen Dickinson said: “With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months.

“But, with signs that inflation has possibly peaked, retailers are hopeful that confidence will continue to improve.”