Nearly half of first time buyers taking out mortgages with Bank of Ireland in the first quarter of 2006 took out 35-year mortgages, substituting a higher debt burden for short term affordability, a new survey shows.
Research compiled by Bank of Ireland Mortgages today shows that the popularity of the 35-year mortgage has almost doubled since 2004. In 2000 only 4 per cent of mortgages were taken over 35-year term.
By opting for the 35-year rather than the 25-year mortgage term first time buyers reduce their monthly repayment by €75 per month, based on average national mortgage of €212,000.
However the interest repayments over 35 years are significantly higher.
In Dublin, opting for the longer-term mortgage meant that monthly repayments were reduced by €95, based on the average Dublin mortgage of €270,000.
"Many commentators have advised first time buyers to avoid longer mortgage terms as they will pay significantly more interest over the life of the mortgage. However, this advice is not hitting home as most envisage trading-up in the short to medium term," said Olive Moran marketing manager at Bank of Ireland Mortgages.
The bank found that 40 per cent of first time buyers traded up to a new mortgage after five years. After seven years this figure rose to 50 per cent and reached 70 per cent after ten years of ownership.
Ms Moran advised mortgage holders who can afford to increase their mortgage contributions to do so.
"Paying an additional €50 a month would save approximately €15,000 in interest and reduce the term by 41 months based on a mortgage of €212,000 over 35 years," she said.