Mortgage and protection network HL Partnership believes that the launch of Retirement Interest Only (RIO) products by lenders, after the relaxation of qualification rules by the FCA, provides yet another valuable alternative to the growing number of later life borrowing options becoming available to older borrowers.
RIO products, from lenders such as the Leeds Building Society and Hodge Bank, among others, are designed for older borrowers over 55, who may be reaching the end of their existing mortgage arrangements, still with a debt outstanding, but without the means to make capital repayments.
RIO products allow them to pay monthly mortgage interest until they move house, go into long term care or die. The loan is repaid by selling the house at one of these events.
Gavin Earnshaw, compliance director at HL Partnership, said: “RIOs represent a valuable option to help interest-only borrowers who need extra time to repay their mortgage balance. With almost two million interest-only borrowers and tens of thousands estimated not to be able to repay their balance in full, there is a potentially huge market, where a RIO could provide a solution.
“We are permitting all mortgage advisers from HLP and our sister network, Mortgage Support Network, to advise on RIOs without the need for additional equity release qualifications. A RIO will seem a great solution for many, but there are some pitfalls, especially where additional equity is being taken, which may require more in-depth affordability assessments as well as consideration for the potential impact on the customers benefits if funds are being saved for a rainy day.
“However, thanks to our strong later life proposition, should a customer have a borrowing need which cannot be accommodated through a RIO, there is an internal referral service to a later life lending specialist within the network with the appropriate skills and knowledge.
“HLP has invested heavily to ensure that advisers have the facilities to offer the right assistance in every circumstance. It is vital that older customers and their families can receive advice from the widest range of options and we believe our members and network are among the best equipped in the industry to provide this service to their customers.”
