Scottish Building Society launches retirement interest-only mortgage
Scottish Building Society adds a Retirement Interest-Only (RIO) mortgage to its range of mortgage products for older people.
The Society is among the first lenders to offer a Retirement Interest-Only mortgage since the Financial Conduct Authority (FCA) reviewed later life lending and introduced proposals to improve access to mortgage borrowing for older people, including those with maturing interest-only mortgages without sufficient funds to repay them.
Scottish Building Society already has over a decade of specialist experience in the market with its interest-only Lifetime Mortgage which allowed borrowers to unlock cash tied up in homes and pay only the interest on the loan. As with the new RIO mortgage, when the property is eventually sold the loan is repaid and the remaining equity stays within the family.
Paul Alexander, Head of Business Development at Scottish Building Society said: “We are expecting high demand for this product, especially when older people become aware of the benefits. It’s good news for those who have perhaps reached the end of their standard interest-only mortgage but have a shortfall in savings to repay the loan, and provides an alternative to a house sale or expensive loan repayments. 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 is an effective tool for reducing inheritance tax burden.
“Because RIO mortgages are not classified as equity release products, financial advisers do not need special permissions to recommend them as an option which means they will be more widely accessible. Advisers and their clients 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.”
The Scottish Building Society RIO mortgage is available to homeowners in Scotland aged 60 and over who have a reliable monthly income in retirement. The Society offers up to 50% of the value of the property as a cash lump sum and charges interest only on the loan. Unlike standard interest-only mortgages 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 no maximum age limit.
Mr Alexander added: “Financial planning in retirement is becoming more flexible with new pension freedoms, but often the biggest asset in retirement pots can be in homes. We treat everybody as an individual and are pleased to have improved access to borrowing for the over 60’s. Where the applicants have a secure income and meet our affordability criteria, a Retirement Interest-Only mortgage may be a more suitable option than equity release.”
Established in 1848, Scottish Building Society is Scotland’s only independent building society. The Society has over 50 branches and local agency offices in communities across Scotland. With over 33,000 members, the Society has mortgage assets of £318.4 million and savings balances of £373.7 million. The Society reported a pre-tax profit of £1.3 million in the last financial year.
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