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Scottish Building Society introduces retirement interest-only offering

  • 30/07/2018
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Scottish Building Society introduces retirement interest-only offering
Scottish Building Society is adding a retirement interest-only (RIO) mortgage to its lending range for older people.


The mutual joins Leeds Building Society in launching into the RIO market since the Financial Conduct Authority (FCA) reviewed later life lending and introduced proposals to improve access to mortgage borrowing for older people.

However, Scottish Building Society said it did not share the concerns others in the market have raised about potential risks for mis-selling RIO products.

It said this was because it has had an interest-only mortgage product for older people for more than a decade and was therefore very experienced in this market.

It added that all the society’s mortgage advisers for the product have equity release qualifications and all applicants are required to seek independent professional legal advice.

The RIO mortgage is available to homeowners in Scotland aged 60 and over who have a reliable monthly income in retirement, and there is no maximum age limit.

It is available at up to 50% of the value of the property as a cash lump sum and only interest charged on the loan.

There is no set end date for settlement of the loan and capital is only repaid after death or on the sale of the house.


Alternative to house sale

Head of business development Paul Alexander (pictured) noted that the FCA’s move presented a real opportunity for intermediaries who were not qualified to provide advice on equity release products.

“Where the applicants have a secure income and meet our affordability criteria, a retirement interest-only mortgage may be a more suitable option than equity release,” he said.

“It provides an alternative to a house sale or expensive loan repayments and is good news for those nearing the end of a standard interest-only mortgage who have a shortfall in savings to repay the loan.

“It also provides an attractive option for managing inter-generational wealth where older people could help younger members of the family buy their first home, for example, and may be an effective tool for reducing any inheritance tax burden,” he added.




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