The launch of retirement interest only (RIO) products by lenders provides a valuable alternative to the growing number of later life borrowing options available to older borrowers, according to HL Partnership.
Designed for older borrowers over 55 who may be reaching the end of their existing mortgage arrangements but without the means to make capital repayments, RIO products allow older borrowers to pay monthly mortgage interest until they move home, go into long-term care or pass away. The loan is then repaid by selling the house when one of these events occurs.
“RIOs represent a valuable option to help interest-only borrowers who need extra time to repay their mortgage balance,” said Gavin Earnshaw, compliance director at HL Partnership, commented.
He said that 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 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.”
Earnshaw cautioned that while RIO will seem like a great solution for many, 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.
He continued: “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.”
“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.”