HSBC 40 YEAR MORTGAGE PAVES THE WAY FOR PROPERTY MARKET RESURGENCE!

Saturday September 9, 2023

HSBC has announced the introduction of a 40-year mortgage, a move that reflects the evolving dynamics in the property market. This extended mortgage term, set to launch tomorrow, seeks to address the challenges faced by potential homeowners who struggle to meet the financial demands of shorter mortgage offers. Moreover, it offers a lifeline to those who are willing to commit to a more extended financial arrangement for the prospect of homeownership.

The 40-year mortgage term will be available for both residential and buy-to-let properties. Initially, it will be accessible through mortgage brokers, with plans to make it directly available from HSBC starting on the 13th of September. Andrew Matson, Head of Mortgages at HSBC UK, acknowledges the growing ambition for homeownership but also the financial constraints that can hinder this dream. He states, “We know that home ownership is a key life ambition for many people, but affordability can be an issue. We are introducing our first-ever 40-year mortgage term to assist our customers. This move underscores our commitment to supporting aspiring homeowners in their journey onto the housing ladder. By extending the mortgage term, we aim to make mortgages more manageable with lower monthly repayments and make homeownership a reality for our customers.”

This announcement comes at a pivotal moment for the property market, with “marathon mortgages” gaining popularity. Rising interest rates have made it increasingly difficult for some prospective buyers to afford traditional 20- or 25-year mortgage deals. This has left first-time buyers searching for alternative options to escape the burdens of renting.

While the allure of lower monthly payments is evident with the extended mortgage term, it’s important to note the long-term implications. The compounding effects of interest over four decades result in a significantly higher total amount paid over the mortgage’s course. However, for many individuals, the trade-off between short-term affordability and the prospect of homeownership is a reasonable compromise.

Notably, smaller lenders have previously ventured into offering 40-year mortgages. However, HSBC’s entry into this market segment as one of the “big six” banks signifies a turning point in the acceptance of ultra-long mortgages into the mainstream. Lewis Shaw, Owner and Mortgage Expert at Shaw Financial Services, points out that HSBC’s move aligns with broader market trends. He explains, “40-year mortgages are not a new concept, and this brings HSBC in line with most of the mortgage market. It highlights the growing demand for longer mortgages, particularly in the wake of the cost of living crisis, rate hikes, and wage stagnation, which have made traditional mortgage terms less accessible to first-time buyers.”

Elliott Benson, owner and mortgage broker at Sett Mortgages, adds valuable insights. He notes that HSBC has a reputation for offering competitive solutions to first-time buyers, and this new offering could provide an even more accessible choice for those considering longer mortgage terms. The move reflects HSBC’s dedication to making homeownership attainable for a broader range of individuals.

The statistics further underscore the shifting landscape of the property market. In 2023, the percentage of first-time buyers opting for 35-year-plus mortgages stood at an impressive 19 percent. This is a notable increase from 2005 when UK Finance first began tracking data, with only two percent of buyers choosing such extended terms. The upward trajectory in the popularity of longer mortgage terms highlights the changing preferences and aspirations of today’s property market participants.

In conclusion, HSBC’s introduction of a 40-year mortgage signifies a significant development in the property market. It reflects the evolving financial needs of potential homeowners and offers a lifeline to those who may find shorter mortgage terms less accessible. While the impact on HSBC itself may be significant, the broader implications lie in the potential upturn for the property market. This innovative approach to homeownership has the potential to make housing more accessible and affordable for a wider demographic, ultimately reshaping the landscape of property ownership. As the property market continues to adapt, HSBC’s move serves as an indicator of the market’s resilience and its ability to adapt to changing economic circumstances.