With a revival in the interest-only market expected to pick up pace over the next year, Waterson (pictured) said that it is vital that solutions for those customers, lacking a repayment plan, don’t create confusion. He also warned against scrimping on the protections enjoyed by consumers who opt for equity release.
He said: “There has been talk of banks extending the contracts of interest only borrowers for the rest of their lifetime. This might allow them to put off settlement of the capital owed, for example, until they pass away and their house is sold.
“But it is very important not to assume this aligns with what regulators define as a lifetime mortgage. The latter can include the option for consumers to pay interest but – crucially – does not oblige them to do so without the freedom to move to a roll-up product if needed.”
Waterson said the equity release statement of principles means borrowers choosing a recognised lifetime mortgage can rely on the guaranteed right to tenure and assured protection against negative equity, among other safeguards.
“It would do interest only consumers a disservice to be moved onto ‘lifetime’ products that fall short of offering the same protections.”
Last month Santander’s head of UK banking Steve Pateman told The Telegraph that the bank is considering launching an equity release mortgage product for its older customers next year. Last week, Leeds Building Society announced it was launching two new interest-only products.
