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Product flexibility in later-life lending helping head in sand homeowners – Miller

by: Dave Miller, client account manager at Spicerhaart Corporate Sales
  • 11/06/2018
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Product flexibility in later-life lending helping head in sand homeowners – Miller
There are an estimated 1.6 million people approaching retirement who have interest-only mortgages, and many of those will not have the ability to repay the capital they owe.


Lenders have contacted all interest-only borrowers over the past few years, but many are burying their heads in the sand, as they don’t like the main three options being presented to them – remortgage, repossession or an assisted voluntary sale.

However, there is another option that is becoming more popular – equity release, with older home owners looking to it for many reasons, including as a solution to the interest-only issue.

As a result, equity release is attracting twice as many new customers as five years ago, with a 90% increase in just the past two years alone.

The range of equity release products on offer is growing by 25% year-on-year with many lenders now starting to offer products specifically designed to help pensioners struggling to pay the capital on their interest-only loan.


Control their retirement

One such product is Legal & General’s optional payment lifetime mortgage which allows borrowers over 55 to take out a mortgage with the interest fixed for life and the capital not due for repayment until they either move into long-term care or the property is sold after death.

This follows on from the success of lenders such as Hodge Lifetime who have successfully developed mainstream interest-only products specifically aimed at those older customers who can still meet affordability in later life rather than move directly into equity release products.

Here the borrower has an option on how to pay the interest – roll it up on top of the capital advanced to be repaid at completion, or make payments of any amount each month from £25 up to the full monthly interest.

This allows borrowers the freedom to choose and control their retirement as circumstances change.

I think we will see more lenders start to offer similar products as the demand for more flexibility in the market increases.

The more lenders there are, the more competitive the market becomes which means rates will fall, and that is great news for borrowers.


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