London, 2nd October, 2023: New data released today by Experian reveals that one in four mortgages lent to those under 30 now have a term of 35 years or more. This is up from one in 10 in 2020[1], an increase of 150%.
The increased cost of borrowing means that many people will be nearing retirement before they’re able to pay back their mortgage loan in its entirety. This group of under 30s who have agreed to such lengthy repayment terms are now becoming known as the Mort-locked generation. And whilst an extended mortgage term can help to keep monthly repayments down, homeowners are likely to pay more interest on their loans over time, as mortgages get more expensive.
According to partner L&C Mortgages, the average two year fixed rate deal now stands at 5.99%, whilst a standard variable tariff (SVT) is a staggering 8.22%[2]. High interest rates are likely to be affecting mortgage applications, as July this year recorded a seasonal low for new homeowners, despite typically being the height of the UK’s moving season.
Experian analysis found that there was a 28% decrease in mortgage applications in July this year, compared to the same month in 2022[3]. It suggests many people might be choosing to stay in their existing locations or rent rather than buy a new property with the current high interest rates on loans. Mortgage applications for first time buyers were also down 19% on last year[3].
James Jones, Head of Consumer Affairs at Experian, says: “Our data suggests that people under 30 are looking to secure longer mortgage repayment terms to help keep monthly repayments down on their homes, and this could also be affecting property buying among house hunters.
“With high interest rates increasing the pressure on borrowers, young people may feel like they have been locked in, so we’re encouraging people to consider ways that they might be able to secure better deals on their mortgage terms. We’d suggest engaging with your credit score and considering whether it can be improved, even if you’re not yet looking to move. A credit score can impact everything from your eligibility to your repayment terms, as it acts as a financial track record for lenders looking to see how reliable you are. Building a good score and credit history will stand you in good stead for the future.”
James Jones’ six tips to improving your credit score:
1. Know your score
Firstly, check your credit scores from each of the three main credit reference agencies. This can be done in minutes online, such as via the free score service on Experian’s website, which also includes lots of helpful tips and guidance.
Review the information on your credit report and make sure it reflects the facts. For example, if you’ve ended a relationship and you’re financially linked to your former partner through past joint accounts or credit then take the time to submit a financial disassociation to each agency, so your future credit applications won’t be affected by their finances.
2. Register to vote
Your credit report includes voter registration records to help lenders confirm your name, address and residential history. By signing up via your local council’s website, you could increase your Experian credit score by around 50 points. New registrations usually feed through to credit reports within about a month.
3. Limit applications for new credit
Space out any credit applications you make and shop around using eligibility-checking services. That way, you will only apply for deals you are likely to get and will avoid collecting multiple ‘hard’ search footprints, thereby protecting your score.
4. Consider allowing your credit history to mature
While it is sensible to shop around from time to time to make sure you are getting the best deals, it will help your credit score if you let some of your credit accounts mature. For example, holding the same credit card for five years can add 20 points to an Experian Credit Score.
5. Set up direct debits
Even though making manual monthly payments to loans and credit cards can make you feel in more control of things, forgetting a regular payment could cause your credit score to decrease. Your Experian score can be reduced by 130 points with just one recently missed payment. I recommend setting up direct debits for all your regular payments to avoid future hiccups.
6. Give your score a Boost
Experian Boost is a free service that can increase your score by up to 101 points. Experian Boost looks at a number of things including regular payments to council tax, savings, and digital streaming services such as Netflix and Spotify. Boost will never cause your score to drop and around two thirds of customers see an instant improvement.
Earlier this year Experian partnered with Leeds Building Society, which became the first UK mortgage provider to connect to our free Experian Boost service. It means that aspiring homeowners can improve their chances of getting on the housing ladder with extra evidence of their good financial track record. For example, regular payments such as digital subscriptions could help to boost your score if paid on time each month.
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Notes to editors:
Media contact:
Brands2Life for Experian
Tel: 0207 592 1200 / Email: experian@brands2life.com
About Experian:
Experian is the world’s leading global information services company. During life’s big moments – from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers – we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organisations to prevent identity fraud and crime.
We have 22,000 people operating across 32 countries and every day we’re investing in new technologies, talented people, and innovation to help all our clients maximise every opportunity. With corporate headquarters in Dublin, Ireland, we are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index.
Learn more at www.experianplc.com or visit our global content hub at our global news blog for the latest news and insights from the Group.