Nearly one in three (30%) advisers want product development to focus on interest-only – the same number who believe equity release rate cuts will drive demand.
The Bower research shows advisers are seeing more clients asking about help with interest-only issues – 15% of those questioned by the national advisory firm say they’ve seen a substantial rise in inquires in the past year.
Advisers estimate that on average 25% of the over-55s clients they see have outstanding interest-only mortgages compared with an average 30% of clients who have outstanding mortgages.
Data from the Council of Mortgage Lenders shows the number of interest-only loans has dropped by a quarter in the past two years to 2.36 million with 1.9 million pure interest-only and 446,000 part and part.
Around 112,000 were paid off last year with another 335,000 switched to repayment. However two-fifths of those switched from interest-only would not have been due for payment until 2028.
Andrea Rozario, Chief Corporate Officer at Bower Retirement Services, said:
“The drop in the number of outstanding interest-only loans shows the success of efforts to ensure people who are at risk are aware of the problem and are taking action.
“However advisers are seeing increased inquiries from over-55s customers looking for help on dealing with interest-only issues and are realising they need to offer a range of solutions which includes equity release plans.
“Equity release plans which enable customers to pay interest are a logical solution for many and underline the need for continuing innovation in the industry as the demand is undeniable there.”
Bernie Hickman, Managing Director, Individual Retirement at Legal & General, commented:
“The equity release market has a great opportunity to respond to the needs of older borrowers who still have mortgages. With around 30% of Lifetime mortgage customers also having a mortgage outstanding, many borrowers who find themselves in this position can turn to equity release to allow them to stay in their home into retirement. The market needs to have the products in place to help people do this, and this is a good example of where market dynamics are likely to drive increased product innovation to meet consumer demand. This market is not currently well served by the mainstream mortgage market and it is an area we are interested to explore.”
