Pensioners looking to help their children or grandchildren get a foot on the property ladder or who are stuck with existing interest-only mortgages could be offered a new type of home loan.
In recent months, we have seen a rise in the number of interest-only mortgages available to those in retirement age. This has made a huge impact for those looking for mortgages in retirement.
This is a huge change given that interest-only mortgages practically disappeared from the market several years ago following the European lending rules
The Financial Conduct Authority (FCA) has delivered on a promise to relax the strict lending rules, and as a result, lenders are now offering retirement interest-only mortgages.
This is great news for retirees needing to clear interest-only debs, wanting to move during their retirement years or even wanting to pass early inheritance to their family.
What’s changed?
In September 2017, the Financial Conduct Authority (FCA) reviewed the European rules given that thousands of credit-worthy older borrowers were coming up against virtually impossible lending conditions.
To qualify for an interest-only mortgage, borrowers needed a capital repayment strategy in place by way of savings, investments or other property to fund downsizing. However, they were unable to use selling their home when they died or moving into full-time care as a repayment strategy. This meant that even though borrowers could meet their repayments, they could not extend their mortgage term if they were relying on their property sale to repay the outstanding debt. This resulted in lenders insisting they sell up to repay the outstanding capital.
The FCA has now announced that these repayment methods can be accepted by lenders, changing the landscape of lending in retirement. Several lenders have already announced new products for retirees.
The current situation
There are many people retiring with outstanding mortgage debt. In fact, last year the FCA revealed that there were 1.67 million full interest-only and part capital repayment mortgages outstanding in the UK, making up over 17% of all outstanding mortgage accounts. An increasing number of these will require repayment in the next few years.
In addition, 70% of these mortgage accounts are held by customers over the age of 45 and 1 in 9 mortgage holders aged over 65 have an interest-only mortgage and many of these people have no idea how they will repay these mortgages.
Talk to us
Speak to one of our independent mortgage advisors for impartial help and advice on mortgages in retirement, and for access to the widest selection of competitive mortgage deals in the UK.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.