Rise in number of retirement interest-only mortgage lenders
The number of providers that offer RIO mortgages has risen to its highest ever level at 22, said Moneyfacts, with three new providers launching the products in 2021 alone.
The financial information provider found that there are now 109 Retirement Interest-Only (RIO) mortgages on offer, up from 74 a year ago.
The mortgages are one of the later-life lending options for older borrowers approaching or in their retirement and, unlike equity release, they are classed as a ‘mainstream’ mortgage by the Financial Conduct Authority.
The average rate charged on a RIO deal is 3.59%, up 0.12% over the last year.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “It is positive to see a rise in the choice of RIO products available for later-life borrowers.
“RIO mortgages are a niche product with perhaps few borrowers for whom they are an appropriate option and make up only a small percentage of mortgage products overall, so any slight positive change impacts the sector.
“The fact that the average rate has decreased of late also indicates an increase in competition, as providers continue to evolve and look to meet demand. Considering that FCA data indicates that there are a significant 40,000 interest-only mortgages due to mature each year between 2017 and 2032 where the borrower will be over 65 at the end of their term, improvements in provision for those who are concerned about their access to appropriate mortgage products as they come to end of their existing interest-only deal are likely to be well received.
“Overall, it is inherently positive that those considering a RIO mortgage now have not only a greater choice of products, but also from a greater choice of lenders. However, borrowers considering a RIO mortgage should secure qualified, independent advice to ensure they are picking the right type of product for their circumstances. Equity release, down-sizing and other options may be valid alternatives, so having the knowledge and support of a professional in making their choice would be vital.”