Legal & General Home Finance has announced a new 5-year partnership agreement with Virgin Money.

The alliance will see the retirement lender offer its lifetime mortgage product range to the bank’s interest-only customers aged 55 and over.

The arrangement adds to the existing partnerships with Santander and The Co-operative bank, with Legal & General making its range of lifetime mortgages directly available to 20% of the UK’s interest-only mortgage customers.

According to data from the Financial Conduct Authority (FCA), there are still 1.67 million outstanding interest-only mortgages in the UK, with around 200,000 loans maturing by 2020. This comes after the regulator called on the industry to do more to support Britain’s interest-only borrowers.

Under the new agreement, Virgin Money’s customers with interest-only mortgages will be introduced to Legal & General’s advised lifetime mortgage products as they approach the end of their loan term.

This includes customers who wish to weigh their options to pay off the outstanding capital of their interest-only loan, as well as individuals who might be interested in accessing their property wealth to improve their quality of life in retirement.

A highlight for Virgin Money interest-only customers will be Legal & General’s new ‘Optimal Payment Lifetime Mortgage’, which does not require the customer to pass affordability criteria as it is written under lifetime mortgage rules.

With this product, customers can choose to pay some, or all, of the monthly interest and if the customer stops making interest payments, they can still remain in their home for life.

This partnership also aligns with Legal & General’s strategy to improve customer access to retirement lending solutions. This approach includes helping to address the lack of interest-only products by driving innovation in the market and bridging the gap between mainstream mortgages and retirement borrowing.

“Solving the interest-only challenge is just one area where we see lifetime mortgages as a potentially transformative solution for the lives of UK borrowers,” Steve Ellis, chief executive officer of Legal & General Home Finance, said.

“Britain’s over-55s are currently sitting on over £1 trillion of property wealth – what could that money do for retirement outcomes, our housing market, and even our economy?”

He said that while lifetime mortgages are already having a huge impact on our society, the firm wants to continue to raise awareness about the ‘transformative effect’ these products could have for many UK retirees.

“Virgin Money shares our vision for customer focused innovation, so we’re delighted to announce our new partnership and offer our retirement lending products to an even wider audience of people looking for flexible later life lending solutions.”

Andrew Asaam, director of mortgages at Virgin Money said he is delighted to partner with Legal & General to offer ‘choice and peace of mind’ to a number of Virgin’s interest-only end of term customers.

“Their Lifetime Mortgage range provides excellent options to help customers manage their finances effectively, including individuals who might be interested in accessing their property wealth to improve their standard of living in a later life,” he said.