The Society is the first national high street lender to enter this new market and has also committed to rewarding brokers for Retirement Interest Only product transfers. At launch on 30 July, the Society will offer three Retirement Interest Only mortgages – fixed rate deals for either two, three or five years – for borrowers aged between 55 and 80.
The Financial Conduct Authority (FCA) introduced the first definition of what constitutes a Retirement Interest Only mortgage earlier this year and introduced specific regulations for this market.
Jaedon Green, Leeds Building Society’s Director of Product and Distribution, welcomed the FCA guidance.
He said:
“As the UK’s population ages and lifestyles and expectations change, we welcome the regulator’s acknowledgement that the needs of borrowers and homeowners will continue to evolve. Similarly, lenders need to remain responsive to these changes, and in how they can support consumers, and our broker partners have an important role to play in what we see will be a growing market.
“We’re the first national high street lender to enter Retirement Interest Only lending and are drawing on our experience and expertise in the interest only sector, together with our understanding of customer need and the wider market.
“Choosing a mortgage is always a highly personal decision and everyone’s individual circumstances and priorities are different, so it’s important consumers take the appropriate advice. For that reason these new mortgages will be available initially only through brokers. It’s important that customers have access to broker support throughout the life of their mortgage, which is why we’re committed to providing intermediary product transfer capability.
“As consumers considering this product are older, they may need more support in reviewing their wider financial circumstances and require specific financial and legal advice on aspects such as pension arrangements, estate planning and future costs for social care.”
The FCA regulations clarify the difference between Retirement Interest Only and lifetime mortgages – unlike a lifetime mortgage, the interest on a Retirement Interest Only mortgage cannot be rolled up so the borrower will need to demonstrate interest only repayments are affordable throughout the length of the loan.
A Retirement Interest Only mortgage will be repaid on a specified life event, which can include the sale of the property, moving into residential care, or the death of the borrower.
David Hollingworth, Associate Director at L&C Mortgages, said:
“Retirement Interest Only has the potential to offer older borrowers an alternative option to a traditional mortgage over a specified term or to lifetime mortgages. The regulator’s move to increase access to Retirement Interest Only recognises that older borrowers will have different requirements that could be better served from a wider range of options.
“The market needs a broader choice available to these borrowers and the launch of Leeds BS into this sector is an important step forwards.”
