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One of Britain’s biggest housebuilders said the share of its first-time buyers taking on more than 36-year mortgages had more than tripled, as affordability issues in the housing market took its first-half profits down by 29 per cent.
Taylor Wimpey said on Wednesday that 27 per cent of its first-time buyers had taken mortgage terms of more than 36 years in the first half of the year, compared with just 7 per cent in 2021.
The proportion of other buyers taking out mortgages of more than 30 years rose to 42 per cent, from 28 per cent in 2021.
“As affordability has become more stretched we have seen mortgage duration increase,” said chief executive Jennie Daly, adding that the end of the government’s help-to-buy scheme this year was a contributing factor.
Soaring borrowing costs as a result of rising interest rates have piled pressure on the housing sector, with UK house prices recording their biggest annual drop in 14 years in July, according to data from Nationwide on Tuesday.
In the wake of successive rises in the Bank of England base rate, to 5 per cent in June, first-time buyers have sought relief in the form of longer-term mortgages. A record 19 per cent of first-time buyers took out mortgages of at least 35 years in March, according to trade body UK Finance, up from 9 per cent a year earlier.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said 25-year mortgages had been the norm historically, but first-time buyers in particular were now spreading their debt over 30 years or more to reduce monthly payments, ultimately borrowing more in the long term.
Laura Suter, head of personal finance at investment platform AJ Bell, said the trend was “worrying” and could have a long-term impact on retirement savings.
Taylor Wimpey posted £237.7mn in pre-tax profit in its first half, a 28.9 per cent fall year on year, as higher borrowing costs dented demand for homes in the second quarter.
“The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates,” said Daly, adding that this had “inevitably” affected the group’s results.
Taylor Wimpey completed 5,120 homes in the six months to June 30, down from 6,922 in the same period last year. But it expects to build between 10,000 and 10,500 homes for the full year, at the upper range of its previous guidance. The company said there remained “strong underlying interest” from buyers, in spite of the difficult economic climate.
Shares in Taylor Wimpey rose 2 per cent in early trading on Wednesday.
The FTSE 100 housebuilder said its average selling price increased 6.7 per cent to £320,000 compared with the same period last year.
Data from the BoE on Monday showed a slight rise in mortgage approvals in June, which analysts attributed to activity that predated the latest increase in borrowing costs.
Taylor Wimpey said it would reward shareholders with an interim dividend of 4.79p a share.
