The payment-term lifetime mortgage allows older homeowners to release tax-free cash at a lower rate of interest than a standard lifetime mortgage.
They have to commit to a period of mandatory payments that last until the oldest applicant’s 66th birthday, but payments only have to be a partial monthly interest payment.
The product offers higher loan to values (LTVs) and more flexibility, allowing borrowers to meet their later life lending needs while lowering the total cost of the loan. With the LTV boost of up to eight per cent available, this can equate to £23,000 of an average property.
The deal aims to increase product choice for mainstream mortgage advisers and equity release specialists supporting customers aged 50-plus looking to borrow into retirement.
Key added that the cost-of-living crisis had significantly impacted older homeowners in terms of meeting monthly payments on standard residential mortgages, but they have the ability to make some monthly payments to lower the overall cost of borrowing. The lender said that it is this cohort it aims to serve.
Will Hale (pictured), CEO at Key said: “The new payment-term lifetime mortgage addresses a growing group of older borrowers who are struggling with their monthly mortgage payments.
“All advisers, both mainstream mortgage advisers and equity release specialists, must broaden their offering and consider all options for customers over 50 looking to borrow into retirement.”
He added: “The new product gives customers access to more of their home’s value while ensuring they remain protected throughout later life, even if their circumstances change.
“Making some mandatory repayments in pre-retirement is a sensible thing to do for many borrowers, as this can significantly reduce the cost of borrowing and can provide greater financial flexibility in the future.”
Hale said: “We are confident our revised approach to advice covers a holistic range of product types for customers, so they can feel confident in our advice recommendations.
“We are focused on leading the way in advice for the new later life lending market. We will continue evolving our approach on products and advice to keep pace with changing needs, a growing market, and the heightened expectations of Consumer Duty.”
