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Scottish Building Society launches retirement interest-only mortgage

Scottish Building Society has added a retirement interest-only (RIO) mortgage to its range of products for older people.

Since the Financial Conduct Authority (FCA) proposed improved access to mortgage borrowing for older people, the Society is among the first lenders to offer a RIO mortgage.

With this mortgage, when the property is eventually sold, the original loan is repaid and the remaining equity stays within the family.


Paul Alexander, head of business development at Scottish Building Society, said the move by the FCA to widen access to affordable borrowing for older people ‘presents a real opportunity’ for intermediaries who previously missed out on this growing market if they were not qualified to provide advice on equity release products.

“Now all advisers can handle this business and can take comfort from the fact that we are already specialists in interest-only later life lending with many years of experience under our belt,” he added.

Available to homeowners in Scotland aged 60 and over who have a reliable monthly income in retirement, the Scottish Building Society RIO mortgage offers up to 50% of the value of the property as a cash lump sum and charges interest only on the loan.

There is no set end date for settlement of the loan and capital is only repaid after death or on the sale of the house. There is also no maximum age limit.

“We treat everybody as an individual and are expecting high demand for our product, especially when older people become aware of the benefits,” Alexander continued.

He said that where the applicants have a secure income and meet affordability criteria, a RIO mortgage may be a more suitable option than equity release, as it provides an alternative to a house sale or expensive loan repayments.

He added: “It also provides an attractive option for managing inter-generational wealth where older people could help younger members of the family buy their first home, for example, and may be an effective tool for reducing any inheritance tax burden.”


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