Key Later Life Finance has added a new Payment Term Lifetime Mortgage (PTLTM) into its advice approach.
The new lifetime mortgage offers higher LTVs and increased flexibility, enabling borrowers to address later life borrowing needs while reducing the total cost of the loan.
Key’s launch is aimed at homeowners who may be struggling to meet increased monthly mortgage repayments, as fixed rate deals end, with many borrowers facing unaffordable monthly payments. The new mortgage is designed to help homeowners at the ‘younger’ end of the later life borrowing spectrum.
For those homeowners who may have already looked into equity release and found it hard to release the money they need to repay their existing residential mortgage, this new solution provides an additional cash boost that can them help pay off their existing borrowing, the firm said.
The new payment-term lifetime mortgage is a new type of equity release enabling older homeowners to release more tax-free cash at a lower rate of interest than would otherwise be possible with a standard lifetime mortgage.
Borrowers have to commit to a period of mandatory payments which last until the oldest applicant’s 66th birthday but payments only have to be a partial monthly interest payment, making the monthly cost more affordable than a standard residential mortgage or a retirement interest only mortgage (RIO). Which is a key barrier for many older borrowers.
The new plan increases the product options for mainstream mortgage advisers and equity release specialists supporting customers aged 50-plus looking to borrow into retirement.
The new Payment Term Lifetime Mortgage can provide an LTV boost of up to 8% – worth more than £23,000 on an average property – and is initially designed to support ‘younger’ later life homeowners who may be in a transitional period between ending full time work and full retirement.
Research from Key shows 50% of 55 to 64-year-olds with outstanding mortgages have six or more years left on their loan. Around 15% have more than six years left. Additionally, UK Finance data shows that over 50% of new mortgage borrowing extends beyond the borrowers 65th year as consumers increasingly extend their mortgage terms into later life.
The cost of living crisis has had a significant impact on the finances of older homeowners, with many struggling to afford the monthly payments on a standard residential mortgage. However, they still have the ability to make some monthly payments to contribute to reducing the overall cost of borrowing. It is this growing group of homeowners that the payment term lifetime mortgage is designed to serve.
Will Hale (pictured), CEO at Key said: “The new payment term lifetime mortgage addresses a growing group of older borrowers who are struggling with their monthly mortgage payments.
“All advisers, both mainstream mortgage advisers and equity release specialists, must broaden their offering and consider all options for customers over 50 looking to borrow into retirement.
“The new product gives customers access to more of their home’s value while ensuring they remain protected throughout later life, even if their circumstances change. Making some mandatory repayments in pre-retirement is a sensible thing to do for many borrowers as this can significantly reduce the cost of borrowing and can provide greater financial flexibility in the future.
“We are confident our revised approach to advice covers a holistic range of product types for customers, so they can feel confident in our advice recommendations. We are focused on leading the way in advice for the new later life lending market. We will continue evolving our approach on products and advice to keep pace with changing needs, a growing market, and the heightened expectations of Consumer Duty.”