A “significant number” of borrowers may end up paying their mortgage into retirement as rising house prices cause them to extend mortgage terms, according to Knowledge Bank.

The criteria search specialist says “a significant number of borrowers are attempting to stretch mortgage terms to 35 or even 40 years”, with ‘maximum age at end of term’ becoming the most-searched term by brokers in August.

This is in line with research by money manager Quilter last month, which showed a 70% rise in 35 year-plus mortgages over the past two years. 

Annual house price growth hit 7.1% in August pushing the average home to £262,954, according to the Halifax house price index released this week. 

Knowledge Bank says: “This trend for elongated mortgages is potentially as a result of rapidly increasing house prices. 

“With higher prices creating affordability issues, some borrowers are looking to spread their mortgage out over a longer time period to lower the monthly repayments.”

The trend towards longer mortgages was backed by the presence of another criteria in the top five most searched, ‘income multiple used for affordability assessment’, which was the second most-searched term in the residential market last month.

The search specialist adds: “Most lenders are happy to offer mortgage terms that reach up until retirement age, but some are now accepting terms that go into retirement. 

“In these cases, lenders require evidence the borrower will be able to afford to make monthly repayments once they retire.”

The firm says the rush for new investors entering the buy-to-let market “showed no signs of slowing down in August”, with ‘first-time landlord’ the most-searched term by brokers, and in response lenders are launching new buy-to-let products for borrowers without a property portfolio.  

In the bridging category, ‘regulated bridging’ is still the number one most-searched term, which the specialist says shows that “people are still clearly considering bridging for homes that they or their families are going to live in. There is clearly a trend to adapt one’s home to create the space they want to live in rather than just settling for what is already available.” 

The data firm adds the presence of ‘heavy refurbishment’ for the first time since April, among the most-searched terms in the bridging market, “also suggests alongside smaller projects like redoing a bathroom, some borrowers are taking on major structural changes, like an extension or an annex”. 

Knowledge Bank operations director Matthew Corker says: “With house prices accelerating at unprecedented levels, it’s not surprising borrowers are looking to lower monthly payments by stretching terms.

“Even first-time buyers in their early 30s are now stretching terms close to, or beyond retirement age. 

“Terms for lenders vary in regards to age limits, some building societies have no maximum age limit, other lenders tend to limit the maximum age to 70 to 85 years old.

“The expectation from the lender is that the borrower will either overpay, or shorten the term when remortgaging, but this could present an issue for some who are still having to work into their 70s to pay off their outstanding mortgage debt.

“Regulated bridging continues to be popular, and it appears some are using these to adapt and renovate commercial properties. 

“With the shift away from offices, and online shopping becoming more popular, converting offices and retail spaces may become more popular in the coming months.”