Later Life

Retirement interest-only products increase to 38

Providers were initially slow to introduce RIO mortgages to the market, with only five products having been launched by two providers by July 2018.

Rozi Jones
|
19th February 2019
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"Mortgage providers that don’t offer RIOs are still relaxing their lending criteria on maximum age in line with the spirit of what the FCA is trying to achieve."

In the year since the FCA reintroduced retirement interest-only mortgages to the market, 38 individual products are now available from 12 providers.

All 12 providers are building societies apart from Hodge Lifetime, with Ipswich Building Society and Nottingham Building Society introducing RIO products for the first time during the past week.

RIOs allow borrowers to pay monthly interest on their mortgage until they die or go into long-term care, at which point, the mortgaged property is subsequently sold as a means to repay the loan.

Darren Cook, finance expert at Moneyfacts, said: “After the FCA gave the green light on RIOs, there were expectations that these types of mortgages would be widely available as an additional option to borrowers. However, providers were initially slow to introduce RIO mortgages to the market, with only five products having been launched by two providers by July 2018, three months after the go-ahead.

“The reclassification of RIO products from under the equity release umbrella in March 2018 must have been a welcome relief for those borrowers who may have reached the end of their interest-only mortgage at an older age and would have had few options open to them.

“Despite our research showing that building societies have been nearly the only driver of the RIO market since its inception, with only three of the 38 total products being offered by a non-mutual, it seems that the older borrower market is also benefiting from banks and building societies scaling back their criteria on interest-only mortgages, as well as extending the maximum age at end of their non-RIO mortgages beyond 80 years of age.

“Last month, Moneyfacts reported that the number of mortgages permitted to end when borrowers are aged between 80 and 84-years-old has increased dramatically in recent years, rising from zero in 2014 to 1,078 products.

“Even though non-RIO mortgages with extended age terms do not exactly fit the Financial Conduct Authority’s RIO definition, it seems mortgage providers that don’t offer RIOs are still relaxing their lending criteria on maximum age in line with the spirit of what the FCA is trying to achieve.”

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