Older homeowners can now have a mortgage for as long as they live, thanks to new deals designed to meet growing demand for borrowing into retirement.
Retirement interest-only mortgages allow older homeowners to make monthly interest mortgage payments until they die or go into long-term care. The lender receives the capital they are owed when the property is sold.
For example, Hodge Lifetime’s new retirement interest-only mortgage for the over 55s, launched this month, has no end date or term, so can take a borrower through to the end of their life.
Homeowners can borrow a maximum of 60% of the property value and can choose from either a two or five-year fixed deal, or a two-year variable rate.
Other lenders allowing borrowing into retirement
Vernon Building Society and Bath Building Society both offer retirement mortgages which can be paid back from the sale of the property when the borrower dies or moves into long-term care.
Vernon Building Society’s retirement mortgages are discounted variable rate deals for the first five years, followed by the standard variable rate for the remainder of the term.
Bath’s retirement mortgages are also variable rate deals. The Society can lend up to 25% of your property’s value, which will be confirmed by a professional property valuation, and properties must be in Bath, Bristol, Dorset, Gloucestershire, Hampshire, Oxfordshire, Somerset or Wiltshire.
Aldermore, meanwhile allows homeowners to hold one of its mortgages until they are 99. The maximum age new borrowers can apply for a mortgage is 85. Borrowers with must have 40% equity in their homes to qualify.
Nationwide Building Society has confirmed that it plans to launch a retirement interest-only mortgage later this year.
Why are these deals being introduced?
Earlier this year the city regulator the Financial Conduct Authority (FCA) relaxed rules on lending to older borrowers and reclassified this type of mortgage as ‘standard’ to make it easier for lenders to offer them. The FCA’s aim is that ‘later life’ borrowing can help tackle the problem of interest-only mortgages where homeowners don’t have sufficient savings in place to repay the capital they owe.
According to research by the Centre for Economics and Business Research (Cebr) commissioned by equity release provider More 2 Life, around four in ten of homeowners aged 65 or more have an interest-only mortgage. Those aged between 65 and 74 owe an average of £120,000.
Retirement interest-only mortgages are not the same as equity release schemes, however, and therefore don’t require specialist advice. Borrowers can access retirement interest-only deals via a regular mortgage broker or financial adviser.
More mortgage options for older borrowers