Vernon and Melton Building Societies launch Retirement Interest-Only mortgages
Vernon Building Society has added four new products to its Retirement Mortgage range, including offset deals which they say will help customers reduce their borrowing.
Rates for the Stockport-based lender’s retirement mortgage will start from 3.49 per cent. Borrowers will be able to to choose between fee or fee-free deals, with or without a lasting power of attorney, and with or without an offset facility.
How offsetting works
The Vernon Offset Retirement Mortgages allow borrowers to effectively reduce their borrowing if they hold funds in an offset savings account with the Society.
For example, if a borrower takes a £50,000 Retirement Mortgage, but only wants to access £20,000 of that money immediately, they can put the remaining £30,000 into their offset savings account where it will be offset against their mortgage, meaning interest would only be incurred on the £20,000 balance.
If they hold funds in an offset savings account with Vernon, borrowers will be able to withdraw money when they need it. As they spend money from their offset savings account, the amount offset against their mortgage will reduce, increasing the loan balance, which will incur interest. If borrowers’ circumstances change they can add to their savings.
The mortgage will be underwritten and assessed for affordability based upon the full amount applied for at outset.
There has been a significant increase in activity in the lifelong lending market in the past year, according to the Equity Release Council’s Spring 2019 market report.
Ian Keeling, director of sales and marketing at Vernon Building Society, said: “Our customers are looking for new opportunities to safely release cash from their homes and seeking more flexibility from lenders.
“Our offset account allows borrowers to have certainty of instant access to a larger sum of money should they need it, without incurring interest until they use it.
“Of course, advice is essential, either through a regulated mortgage broker or directly through our experienced advisers.”
Melton launches RIO
Melton Building Society has also launched a retirement interest only (RIO) mortgage. Offered through intermediaries at a 2.99% interest only discounted rate for term up to 50 per cent loan-to-value (LTV), it will be available to customers aged 65 and over.
Income must be sustainable for the life of the mortgage. Melton will consider both earned and pension income when assessing affordability. It comes with a £199 application fee and £199 completion fee and the Melton requires a Lasting Power of Attorney to be registered.
There will be no upper age limit or maximum term with the product. Borrowers make interest only payments on the loan up to the point of a significant life event at which time the proceeds of the sale of the property repay the loan.
Dan Atkinson, head of sales and marketing at the Melton, said: “Our overall later life lending proposition lends up to a maximum age of 80 as standard, and recognises demand from older customers who either need a longer term solution to their standard interest only mortgage, or want to make the most of the equity they have built up in their homes, for example to help their children get on the property ladder or take the holiday of a lifetime.”