Monday, August 23, 2010
Don’t worry, rising house prices will inflate away the debt
They are billed as a painless new way to spread the cost of buying a home. But experts warn the introduction of 40-year mortgage terms may end up almost doubling your debts - and leave you struggling to pay the bills well into your 70s. A host of lenders have ditched the old rule that mortgage terms are set for a standard 25 years and must be cleared by the normal retirement age. Now, Halifax, HSBC, First Direct and ING Direct all let borrowers keep their mortgages running for another decade and a half. Taking a typical Â£125,000 repayment mortgage for 25 years will cost Â£695 a month at a decent 4.5 per cent interest rate, for example. But you have to find just Â£562 if you extend the mortgage term to 40 years. The saving is likely to be attractive to younger, first-time buyers.