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‘RIOs are pointless if they are unreachable for many’ – Star Letter 28/02/2020

  • 28/02/2020
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‘RIOs are pointless if they are unreachable for many’ – Star Letter 28/02/2020
Each week, Mortgage Solutions and its sister title Specialist Lending Solutions runs a Star Letter feature, in which we collate the top comments posted under our articles.


First off this week was from our review of the retirement interest-only (RIO) mortgage: Why the RIO did not take off – Lenders open up.

Paul Fielding added to the discussion. He said: “It’s not a surprising conclusion. As later life advisers, we strive constantly to ensure that we include RIOs as part of our advice process as an alternative to traditional equity release-based solutions.  

“I write business for both but as the article makes abundantly clear, it’s pointless having a possible solution if the criteria governing that solution makes it unreachable for the great many. 

“In addition, lenders are afraid of incurring the wrath of the Financial Conduct Authority (FCA) and no one lender wants to take the risk of falling foul of the rules as they stand.”  

He added: “Imagine a building society, especially one of greater size – the bigger they are, the harder they fall – being publicly hauled over the coals by the regulator. And imagine what front page reading that would make when the size of fine is revealed. 

“Unless the FCA gets together with our side of the industry with a clear and unequivocal will to make this work, while paying somewhat more than lip service to this monumental issue, then what will change? 

“Nothing I fear, and no, I don’t mean a free for all with no controls. Just a very much more joined up way of approaching and sorting the problem. It’s down to mindset, surely?” 


A smaller market presence 

Arron Bardoe also weighed in. He added: “An additional challenge with retirement interest-only (RIO) mortgages is that it is mostly offered by small building societies, who in turn have a smaller business development manager (BDM) presence in the market. 

“These lenders need to ensure their websites provide a comprehensive overview of their RIO criteria, for example collating all the FAQs, reasons they say yes or no to brokers as well as clear affordability calculators.

“Many contain vague terms such as ‘underwriters can consider/have discretion’. Some lenders will consider five per cent of investments and drawdown pensions as income, but this is not made clear on their online calculator. 

He added: “Thereon, there is the opportunity of mortgage events such as expos to promote awareness. Indeed, perhaps the best solution is for RIO lenders to work together to run an event?” 


Nil value frustration

Another story which gained a response was: Surveyor gives ‘nil valuation’ on house with neighbouring overgrown garden.

George Peach said: “The nil value return is a frustration however; it might be that there are factors that affect the potential resale of a property. I have had two cases in the last month where the surveyor returned a nil value due to resaleability even though I protested and provided like-for-like sales in the local areas.  

“If a value was returned then the lender could insist on a lower loan to value (LTV), but one of mine was a 45 per cent LTV and the other 65 per cent. The resaleability issue I would understand if we were at 90 or 95 per cent, but when the LTV is so low lenders need to take a look at their criteria for surveyors as it is something that is out of the hands of brokers. 

“We can do all the research, criteria check and discuss cases with lenders to ensure every item of the case is covered, but ‘down to valuers comments’ always seems to be one area that we have to apply and hope.” 


Do the crime, do the time

The news of the regulator admitting to publishing consumer details also got a reaction, in the article: FCA admits data breach.

Paul Fielding commented again, as he said: “Ah, but will the carpet be big enough to sweep this under it? As advisers even if we removed the offending data from view, we would be deemed as having committed the crime, so punishment shall ensue.  

“It’s a bit like stealing someone’s money, then paying it back when you get caught out to make things right as if it didn’t happen in the first place.” 


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