Retirement interest-only mortgage choice triples in a year
There are currently 21 providers for retirement interest-only (RIO) mortgages, nearly twice as many compared to the 12 offering the product in November last year, data from Moneyfacts has shown.
The firm said this was the highest number of active RIO providers it had recorded, as it suggested the later life proposition was one of the few to expand despite the coronavirus pandemic.
There is also more choice for borrowers seeking this type of deal as number of RIO mortgages on the market rose over the course of the year from 74 in February to 112 in November.
Annually, this was almost a tripling of the 38 RIO mortgages on the market last year.
The average rate of the product went up to 3.59 per cent, an increase from 3.47 per cent in February.
The analysis follows research from Responsible Life which revealed that despite the growth of the offering, the take up for RIOs had fallen short of the Financial Conduct Authority’s (FCA) prediction that 21,000 would be sold by next year.
Instead, its research showed just 2,911 have been sold since 2018.
Eleanor Williams, spokesperson at Moneyfacts.co.uk, said: “It seemed to take some time for providers to react to the FCA’s directive in March 2018 to support older borrowers’ mortgage needs, and our records show that only two providers had launched a total of five RIO products by July 2018, rising to 12 providers with 38 deals available in February 2019.
“However, competition in this sector has increased recently; there are now 21 providers active – the highest we have recorded so far – with three lenders entering this section of the market since February 2020.”
She added: “Provision of RIO mortgages seems to have weathered the storm of the coronavirus pandemic slightly better than the standard residential mortgage sector, as we see growth in both the number of products and number of providers lending in this arena, seeming to show that lenders have the appetite to offer products for those later in life.”