RIOs are much like normal mortgages, they allow borrowers aged 55 and over to make repayments on their home loan by paying the interest only.
Unlike, standard mortgages, however, there is no end date for the loan and borrowers continue to make payments either until their die or go into long-term care. At this point the property is sold to repay the debt.
Demand from older borrowers
RIOs were launched in March 2018 as an alternative to equity release. The regulator, the Financial Conduct Authority (FCA), gave the products the green light in order to meet the increasing demand in the mortgage market for more borrowing methods for older consumers.
However, only two providers had launched five RIO products by July 2018, meaning borrowers did not have a great deal of choice.
Now, new data from Moneyfacts.co.uk has revealed, there are 74 RIO products available and the average rate on these products has fallen slightly from 3.50% to 3.47%.
‘Lifeline’
The statistics have been published just a week after Ipswich Building Society revealed more than half of borrowers aged 50 plus thought there were fewer mortgages and providers available to them than young applicants.
But Eleanor Williams, finance expert at Moneyfacts, said its data will come as welcome news to many of these borrowers.
“Historically, many older borrowers who had retired or were shortly due to do so, found it difficult to find a new mortgage deal,” she said.
“When the FCA reclassified RIOs as mainstream mortgages rather than equity release products in early 2018, a lifeline was thrown to many who may have previously felt trapped or not catered for.
In the last year, according to Moneyfacts, the number of providers offering RIOs increased to 18. What’s more the number of products available almost doubled to 74 – compared to 38 deals in February last year.
Get advice
Williams added: “Those looking to take advantage of a RIO mortgage deal should consider their next steps carefully.
“Lifetime mortgages and equity release products may also be available, and so seeking independent financial advice could be invaluable in ensuring you select the right product for your circumstances.”
Click here to read our RIO guide which explains more about how these mortgages work in more detail.
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What Mortgage has teamed up with Equity Release Supermarket to answer your questions on Equity Release.
To read this month’s Q&A or to submit your own query, click here.
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