The Bank of England has expressed concern at the number of homeowners taking on 35-year mortgages and warned Britons are increasingly turning to credit cards to help cope with cost-of-living crisis.

According to the central bank, a growing number of mortgage-holders are extending the period over which they pay back their loans as they are struggling to make their monthly payments.

A longer mortgage term can ease cost pressures in the short term by reducing the amount owed each month, but it could cause more financial pain in the longer term.

BoE reports that the share of new mortgage lending on terms of at least 35 years has increased from 4% in the first quarter of 2021 to 12% cent in Q2 2023.

During this period, the bank has hiked the base rate from 0.1% to 5%, and has since pushed it higher to 5.25%, pushing the interest on mortgages, loans and credit cards higher.

It has also been noted by the central bank that more households have switched to interest-only mortgages to reduce the strain on finances, which means the actual loan is not being paid off.

In its latest financial policy summary, Threadneedle Street said that while the number of homeowners in mortgage arrears has risen, the figure ‘remains low by historical standards’.

“There is evidence that some households are increasing the use of consumer credit in response to cost-of-living pressures, which could lead to greater debt vulnerability,” the report stated.