Retirement-interest only (RIO) mortgages underwent rule changes in March last year which meant they switched from being classified as equity release products to mainstream mortgages.
The reclassification came in response to social and economic changes but also to provide solutions for people who were coming to the end of their interest-only mortgages and had no other options.
But while the products were available in principle, to begin with they were unobtainable in practice because few lenders were providing them.
Indeed, financial analysts at Moneyfacts.co.uk, revealed in July last year only two providers had come into the market offering a total of five products between them.
New RIO mortgages
The latest data, however, shows there has been some growth since this time. Moneyfacts revealed there are now 38 products from 12 providers with building societies being the main driver. In fact, only one of the providers, Hodge Lifetime, is not a building society.
In just the last week The Nottingham Building Society and Ipswich Building Society announced they would be providing RIOs.
Nikki Warren-Dean of The Nottingham said it launched three new RIOs to add choice for people in, or heading towards, retirement.
She added: “Our research shows many people want to use their money to enjoy their retirement rather than having large amounts of capital tied up in their property. RIO mortgages can help, so we wanted them to be available to customers.”
These latest releases will come as good news to borrowers who were hoping to take advantage of these new products to support them through retirement.
Darren Cook, finance expert at Moneyfacts, said: “After the FCA gave the green light on RIOs, there were expectations that these types of mortgages would be widely available as an additional option to borrowers.
“However, providers were initially slow to introduce RIO mortgages to the market, with only five products having been launched by two providers by July 2018, three months after the go-ahead.”
He added: “The reclassification of RIO products from under the equity release umbrella in March 2018 must have been a welcome relief for those borrowers who may have reached the end of their interest-only mortgage at an older age and would have had few options open to them.
Borrowing into retirement
Moneyfacts identified last month that banks and building societies were extending the maximum age at the end of their non-RIO mortgages beyond 80 years of age.
It also said they would benefit from banks and building societies scaling back their criteria on interest-only mortgages.
Cook added: “Even though non-RIO mortgages with extended age terms do not exactly fit the Financial Conduct Authority’s RIO definition, it seems mortgage providers that don’t offer RIOs are still relaxing their lending criteria on maximum age in line with the spirit of what the FCA is trying to achieve.”
