The ‘Interest Choice’ plan is aimed at customers looking to move from an interest-only mortgage to a lifetime mortgage.
Maximum loan-to-values (LTV) on the plan now start from 24% at age 60 compared with 20% previously and at 39% at age 75 compared with 36% previously. For those aged 85 or more the maximum LTV remains at 45%.
FCA figures show about 40,000 residential interest-only mortgages will mature each year between 2017 and 2032 where the customer is aged 65 or over.
The Interest Choice Plan allows customers to choose the level of interest they repay on loans while fixing their interest rate and having access to a lifetime drawdown facility.
Customers can choose to pay all or part of the monthly interest on their loan and choose how much to withdraw. Those who do not take the whole loan-to-value can make further withdrawals.
The customer also has the option to convert the loan to a standard roll-up lifetime mortgage at no extra cost. Interest payments can only be made on the initial loan amount and cannot be made on subsequent drawdowns.
Dave Harris, managing director at more 2 life, said: “People need more flexible options for retirement income and the option of accessing property wealth as the cornerstone of retirement planning will continue to grow. Lifetime mortgages are ideally suited to those who are near or at retirement with repayment shortfalls and low retirement incomes and who wish to remain living in their property.
“The lifetime mortgage market is evolving rapidly and we anticipate increasingly competitive rates and customer product terms to emerge in the next year. The momentum will be supported by falling interest rates and the development of new product types.”
