15 Sep, 2023/ by Homeward Legal /Remortgage
As part of their mortgage statistics report, the experts at Uswitch.com, the UK's top comparison website for home services switching, surveyed over 2,000 UK homeowners to investigate how homeowners from different age groups were utilising the potential of tracker mortgages.
What the survey revealed provides an interesting snapshot of the situation with mortgage products across a set of six age profiles.
In recent months, those on tracker mortgages have seen significant hikes in their monthly repayments. As a consequence, homeowners who aren't protected by having a fixed-rate mortgage may be considering moving to a new deal or remortgaging with another lender to get the best that's available for the current situation.
However, to counter this, there are some experts who are predicting that interest rates could decrease after peaking in 2023. The practical upshot of this is the possibility that a tracker mortgage could result in lower monthly payments, and therefore more money could be saved in the long term.
But do British homeowners think it's worth the risk?
The spread of mortgage products by age
| 18-24 | 25-34 | 35-44 | 45-54 | 55+ | |
Tracker mortgage | 17.82% | 4.15% | 3.72% | 7.47% | 6.56% |
Fixed-rate mortgage | 41.58% | 80.73% | 79.84% | 70.84% | 56.56% |
Standard variable rate mortgage | 25.74% | 11.96% | 13.49% | 20.24% | 35.66% |
Discounted mortgage | 14.85% | 3.16% | 2.95% | 1.45% | 1.23% |
Source: Uswitch.com
This mortgage product data shows:
- The most popular product for homeowners aged 18 to 24is the tracker mortgage, as almost a fifth of them took the risk of fluctuating interest rates impacting their monthly repayments.This is over four times more than 25- to 34-year-olds.
- Standard variable rate (SVR) and discounted mortgages are also much more popular for 18- to 24-year-olds.
- While fixed-rate mortgages are the most popular across all age brackets, they are used far less by the youngest of the homeowners. At least half of every other age bracket has a fixed-rate mortgage. 4 in 5 of 25- to 34-year-olds chose this rate, but only 2 in 5 of 18- to 24-year-olds opted for this deal.
- At 7.47%, 45- to 54-year-olds are the second most likely to choose tracker mortgages.
- This is far less likely than 18- to 24-year-olds of course, but 45- to 54-year-old homeowners are twice as likely to opt for a tracker deal than 35- to 44-year-olds, the group that isthe least likely of any age group analysed.
- Standard variable rate mortgages are also more popular with 45- to 54-year-olds, as 1 in 5 have taken these mortgage plans. SVRs also pose potential risks, as the interest rates are dictated by the lender themselves, rather than the Bank of England.
- More than 1 in 20 of those 55 or older have taken tracker mortgages, and the potential benefits and risks that come with it.
- While only just over half of this age group opted for a fixed-rate mortgage, they were still less likely to have tracker deals than 45- to 54-year-olds, despite almost three-quarters of them having a fixed-rate plan.
This is because over a third of those 55 or older chose a standard variable rate mortgage, the most analysed in the study and three times more than 25- to 34-year-olds.
Monthly mortgages repayments by age
Another interesting slice through the available data is how much each age group is paying in their monthly repayments to service their mortgage loan.
18-24 | 25-34 | 35-44 | 45-54 | 55+ | |
Average monthly repayment | £1,390.90 | £874.35 | £849.92 | £786.89 | £763.79 |
Source: Uswitch.com
This monthly repayment data shows:
- On average, 18- to 24-year-olds spend £1,390.90 a month in mortgage repayments, the highest of all age brackets.
- This is almost two-thirds more than 25- to 34-year-olds, where the average monthly payment is £874.35 and the second most expensive repayment.
- In fact, this difference becomes greater the larger the age gap. Those 55 and older have the cheapest monthly payments, averaging just £763.79. This is is almost half less than the average monthly repayments for 18- 24-year-olds.
Claire Flynn, a mortgage expert at Uswitch.com, commented on how to manage your finances when applying for a new mortgage:
“Give your finances a health check: a good credit history is essential to getting a good mortgage deal, so be sure to check your credit report for the full picture of all your outstanding debts.
“It's vital to make sure that all the information is correct, as any mistakes may hurt your chances of securing a loan.
“Try to reduce spending: not only does lowering your spending help save for a deposit, but fewer outgoing payments may also help your chances of being accepted for a loan.
“Review any direct debits or standing orders you have set up and see where it's possible to cut back.
“Apply with caution: Don't be tempted to make multiple mortgage applications just to see what kind of offers you can get.
“Every time you apply for a mortgage, the lender will perform a hard credit check which can affect your credit score.
“Instead, consider talking to a mortgage broker to get a better understanding of what deals are the right fit for you.
“For more information see our guide on first-time buyer mortgages.”
This article was kindly provided to Homeward Legal by Uswitch.com
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