Younger homebuyers seek lower payments through longer loan terms
A growing proportion of first-time buyers are choosing mortgages with terms of 30 years or more to keep monthly repayments manageable in the current housing market, Barclays has reported.
According to new data from the Barclays Property Insights, 41.3% of first-time buyers selected mortgage terms of at least three decades, a trend attributed to their younger age and the opportunity to spread repayments over a longer period. Nearly four in 10 mortgage holders overall expressed a preference for 30- to 40-year terms, citing the benefit of reduced monthly costs.
At the same time, 41% of homeowners said their mortgage payments represented a significant share of their income, with the average proportion rising to 27.7% of take-home pay in August, up from 26.6% in July.
Despite the appeal of lower monthly payments, more than half of those with a mortgage (53%) voiced concerns about the long-term implications of extended loan durations, fearing increased financial vulnerability later in life. This sentiment was particularly strong among Millennials, with 60% expressing caution.
Alongside the shift in mortgage preferences, Barclays data shows that three-bedroom homes remain the most popular choice, accounting for 46% of purchases in August. Millennials, aged 28 to 43, are especially likely to buy properties with more bedrooms than they currently require, with 22% doing so to avoid the need to move in future. This compares to 13% across all age groups.
First-time buyers are also showing a preference for houses over flats. Semi-detached properties made up 33.5% of first-time buyer purchases in August, a 1.7 percentage point increase year-on-year. Flats, meanwhile, declined in popularity by 2.7 percentage points, representing 19.6% of first-time buyer acquisitions.
A third of Generation Z buyers, aged 18 to 27, reported purchasing a ‘forever home’ to avoid moving again, while 27% of all recent buyers intend to remain in their new homes for at least a decade.
When it comes to property features, 49% of Generation X (aged 44 to 59) and 40% of Millennials prioritised gardens or outdoor space. By comparison, only 32% of Generation Z shared this preference, though 28% of this group sought a dedicated workspace at home, compared to 20% of Millennials and 9% of Generation X.
Meanwhile, market confidence showed a modest recovery in August, with sentiment rising to 29% after reaching a six-month low of 26% in July. However, concerns about affordability persist. Mortgage and rent expenditure increased by 4.4% year-on-year in August, though this was a slower pace than July’s 5.2%, following the Bank of England’s decision to lower the base rate. Sixty percent of respondents remain worried about rising housing costs.
Despite ongoing affordability challenges, 22% of renters believe they could achieve homeownership within five years, up from 16% the previous month and the highest level since February. Nevertheless, nearly half (47%) cited high house prices as a major obstacle, an increase from 38% in July.
Rising housing costs are affecting renters’ ability to save, with 61% experiencing or expecting increases this year. In response, 40% are reassessing their budgets, 43% are reducing discretionary spending, and 27% are cutting back on holidays.
“Our data shows that first-time buyers are not considering property merely to get a ‘foot on the ladder’ but for the long term,” said Jatin Patel (pictured right), head of mortgages, savings and insurance at Barclays. “
“Whether it’s to create space for a growing family, or to invest for the future, it’s encouraging to see young people feel slightly more confident in taking this significant step. It’s clear that buyers are still cost-conscious as 30-plus year mortgage terms become more popular - this option helps consumers reduce their payments by stretching their borrowing over a longer period of time.”
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