The product is being targeted at the 1.67m borrowers with outstanding interest-only mortgage deals who may be approaching the end of their term but don’t have a plan in place for how to repay the outstanding capital.
L&G said the deal works as a halfway house for retired borrowers for whom neither a residential mortgage nor a traditional lifetime mortgage are suitable. Borrowers are able to continue paying off the interest on their loan for as long as they wish, but can choose to stop these repayments at any time.
The lender pointed out that borrowers will not need to pass any affordability assessments nor have a capital repayment strategy in place, as the debt will be taken from the sale of the property upon the borrower’s death or when they move into care.
Borrowers must be aged over 55, while the product is only available through intermediaries and on an advised basis.
Steve Ellis, chief executive officer at L&G Home Finance, said that the lender often heard from customers who wanted to continue paying off the interest on their home loan and “feel let down by the mortgage market” as they no longer qualify for a traditional product.
He added: “OPLM is a direct response to this growing customer need for a different kind of retirement mortgage, one that provides flexibility for borrowers and which also has the potential to address the interest-only shortfall that remains a fundamental issue for the mortgage market.”