A total of 112 retirement interest-only mortgages were sold last year, according to a report by the Daily Mail, prompting some discussion in the mortgage industry.
The data comes from the FCA via a freedom of information request. It outlines that only 14 RIOs were approved in Q3 2018 and 98 more in the final quarter of the year.
Mortgage Strategy approached several industry voices for their take on this.
L&C Mortgages associate director David Hollingworth says: “It is still relatively early days for RIOs, but lender and product options have been on the rise, which will bring greater awareness, not only for customers but also for advisers.
“Leeds Building Society is arguably the biggest high street lender brand to have launched RIO so far, along with a good range of options from smaller building societies which so often show strong support to this market.
“The awareness will gradually grow but I expect it would be accelerated by a large lender launch, such as Nationwide Building Society which has already indicated its intention to develop the product.
“There are other challenges to uptake and not everyone will be able to meet the ongoing affordability requirements.
“However, that has to be a crucial element in assessing the suitability of the product and the need to stress not only for rate movement but also for the potential loss of income should an applicant pass away.
“We are seeing encouraging improvements in the options on offer with lenders developing long term product options that should sit well in this market.”
SPF Private Clients chief executive Mark Harris agrees that things are just getting started: “The RIO market is still in its infancy,” he says. “The market was slow to begin… but there is a growing awareness and increasing number of lenders and product options.
“It really needs one of the ‘big six’ to enter the market, of which Nationwide are currently piloting within this area.”
“Later-life borrowers are also benefiting from policy expansion in the areas of maximum age and interest only from the non-RIO lenders so have more options available to them.”
Sesame and PMS specialist lending relationship manager Stephanie Charman comments: “RIOs as a product offering is still in its infancy. We saw the first lender launch a RIO product in June last year, and at this present time there is only approximately 13 lenders with a RIO offering.
“With a range of building societies having mainstream criteria which can assist older borrowers, and equity release lenders continuing to enhance their products with new flexible features, RIO now complements a wide range of options for advisers to consider.
“There is still a perception that advisers need an equity release qualification to advise on RIO, which is not the case.”
Teeside Money director Steve Paterson says: “I think the reason RIOs have not taken off is due to the affordability issues surrounding this type of mortgage.
“With equity release and other options which rival RIOs, affordability issues are not as present.
“This results in equity release being a better option for some borrowers, and therefore taking business away from the RIOs.”