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Hodge Lifetime announces retirement interest-only loan with no end date

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  • 30/05/2018
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Hodge Lifetime announces retirement interest-only loan with no end date
Hodge Lifetime is launching a residential retirement interest-only product with no end date, set term or maximum age limit.

 

The mortgage enables interest-only payments to be made until the customer dies or goes into long term care with the capital being repaid at that point.

The lender said it had launched the mortgage in direct response to the Financial Conduct Authority’s (FCA) relaxation of rules on lending to older borrowers.

As a result of the changes the retirement interest-only market is expected to see significant development, with Nationwide announcing earlier this month that it was already planning a product.

 

Whole market distribution

Hodge said its offering was the first product of its kind for over 55s and that as it is not an equity release product, advisers do not require a specialist qualification.

It will be available from 11 June, only through intermediaries and requires no minimum amount of equity to be held in the property.

Hodge Lifetime business development director Steve Cox (pictured) told Mortgage Solutions that it would be available to whole of the advice market and the lender recommends borrowers regularly review their situation with an adviser to ensure it is still an appropriate product for them.

 

Product specifications

The deal is available as an initial two- and five-year fixed period with rates at 3.59% and 3.99% respectively, or a two-year variable at 3.44%. It will then revert to the standard variable rate (SVR) of 4.45%.

However, that customers reaching this point with no changes to their situation would be able to perform a product transfer with the lender or remortgage should other lenders enter the market.

“Although it’s written to go to the end, we’ve still gone with these initial two or five-year periods to give advisers the natural check points,” he said.

“We’ll see how the market reacts and it may be that customers want longer fixed-term periods, so for example we could consider a 10-year fix if that was the case,” he added.

A £995 product fee applies, up to 10% overpayments per year are permitted, with the product available at up to 60% loan to value (LTV).

A minimum property value of £100,000 is required with loans available from £20,000 up to £500,000.

 

No exit plan needed

The lender said it would suit a range of needs for older borrowers, including those reaching the end of their standard interest-only term with no means of repaying the capital, those unable to remortgage with mainstream lenders, or those looking to buy a new home in or close to retirement.

“This should work for those borrowers who can meet the affordability requirements of standard interest-only mortgages but don’t want to worry about an exit plan,” Cox continued.

“They have got a solid income but don’t want to move out at the repayment point.

“Now, borrowers over the age of 55 will be able to re-mortgage or take out a new mortgage with no restrictive end term in place which means borrowers as old as 85 could still re-mortgage,” he added.

 

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