Lending into retirement is expected to be the fastest growing segment in the specialist mortgage market over the next two years.
According to the latest Financial Adviser Confidence Tracking (FACT) Index from Paragon, nearly 80% of mortgage intermediaries are expecting a retirement lending boom. Today lending into retirement accounts for around 11% of specialist mortgage cases. Despite self-employed cases accounting for 23% and complex income 13%, intermediaries believe it is the retirement sector that has the most potential for growth.
Broadening the options of older customers
In a move to broaden the product choice for older customers the Financial Conduct Agency (FCA) redefined the treatment of retirement interest-only (RIO) mortgages as standard mortgages earlier this year – permitting retirement interest-only mortgages. The FCA believes that interest-only retirement borrowing will help older customers with reliable income access lending later in life.
A safety net for maturing interest-only mortgages
For retired borrowers concerned about repaying an existing interest-only mortgage due to a shortfall in funds to clear the loan, the option to refinance will be a relief. Rather than being forced into a house sale or taking on an expensive personal loan to make up the shortfall, a retirement interest-only mortgage offers an affordable and accessible safety net without additional burden.
Lenders need to step up
Intermediaries are experiencing great demand from customers with more complex requirements than ever before, but it is the lenders that need to step up to meet their needs. For later-life borrowers, lenders need to review their policies on maximum age limits, the diversity of acceptable income sources, the availability of interest-only products and the choice of repayment strategies.
This week, Marsden Building Society extended its Older Borrower range with the introduction of a retirement interest-only mortgage available to those over the age of 55 for purchase or remortgage up to a loan value of £750,000. The product is available as a 3-year fixed rate of 3.49% up to 50% LTV.
Marsden are not the only lenders expanding their range to assist older borrowers. Leeds Building Society, Buckinghamshire Building Society and Scottish Building Society are all offering retirement interest-only products, and more will follow as the need to cater for a more diverse range of customers than ever before becomes the norm.
For retired borrowers considering an ROI mortgage as an alternative to equity release or property sale, the usual rules apply:
- Do your research
- Take expert advice
- Make sure that an ROI mortgage is the right choice for your circumstances