A report from later life broker firm Responsible Life based on information from the regulator found that the product made up just 0.24 per cent of mortgages sold last year. This was up by nearly a quarter when compared to the year before when 2,558 were sold.
When RIOs were launched in 2018, the Financial Conduct Authority (FCA) predicted that around 21,000 would be approved each year by 2021.
However, the total sales from when the product was launched are yet to reach 10,000 as just 8,943 have been approved.
Responsible Life said RIOs were meant to make it easier for people on interest-only mortgages to refinance. Yet the most recent data from UK Finance showed there were 754,000 outstanding interest-only mortgages at the end of 2021.
The broker firm said the current version of the RIO would “never become a mainstream financial tool” for retired homeowners, despite the demand for the product.
RIOs need to reach a wider audience
Steve Wilkie, executive chairman of Responsible Life, said: “Hundreds of thousands of people face hitting retirement with conventional interest-only mortgages they cannot repay and RIOs could be a useful product. But they must be capable of reaching a wider audience, and that rests on how easily applicants pass affordability tests
“The sole survivor rule is one key area that could be overhauled, because it means that each individual borrower must show they can afford the monthly payments on their own. An easy way around this rule would be to allow borrowers to plan for the sale of their home as a repayment vehicle, or convert their RIO into a lifetime mortgage when it makes financial sense.”
