Home buyers extend mortgages in affordability struggle

Customers at one of the UK's biggest housebuilders are taking out longer mortgages to make monthly repayments more affordable.

Taylor Wimpey said 27% of first time buyers are taking mortgages of more than 36 years compared to 7% in 2021.

While extending mortgage terms means lower monthly payments, customers end up paying more overall.

Mortgage rates have been soaring as the Bank of England raises interest rates to try to get inflation under control.

The housebuilder said that alongside first time buyers, second time buyers are also increasing mortgage terms, with 42% taking mortgages of more than 30 years, compared with 28% in 2021.

In the UK as a whole, the number of housing transactions was higher in June compared with May, but it was 9% lower than in June 2022, according to HMRC statistics.

Taylor Wimpey said that interest rate hikes had hit the cost of borrowing for customers.

The "challenging backdrop" for customers has led to more of them extending their mortgage terms, it said.

It added that the "substantially higher mortgage rates" had "inevitably" hit its results - but it said it expected to sell between 10,000 and 10,500 homes by the end of the year, which was at the upper end of its expectations.

It made a profit of £238m in the first half of the year, which was 29% lower than last year.

Meanwhile, Connells owner Skipton Building Society said the estate agents, which has 10% of the UK market, had made a net loss of £5.8m in the first half of 2023.

It said the fallout from last year's mini-budget, which "stalled" the housing market, had hit Connells sales.

Skipton Group chief executive told the BBC Radio 4 Today programme that although overall sales had fallen, the proportion of sales to first-time buyers had gone up.