It has been just over one year since the Tipton became the first building society to launch a true retirement interest-only product. Our RIO was introduced with a range of options that includes support for consumers who are stuck with expiring term mortgages with no method of repayment. It can assist customers who wish to re-mortgage, ‘mortgage prisoners’, release funds using equity, or borrow on specific property types, such as retirement homes.
Despite a slow start, activity has really picked up in 2019 and we are now ahead of our target for this year in terms of completions of RIOS. Our BDM team is also receiving more enquiries from brokers as demand continues to grow. What’s more, as new lenders such as the Nationwide enter the RIO market, awareness and familiarity of this type of lending continues to increase and helps to fuel sales.
Clearly, the RIO market has a long way to go to reach its full potential. Lenders will need to innovate and develop products that meet the changing needs of an ageing population and educate the market on RIO loans. Potential borrowers are now confronted with a variety of choices when it comes to later life lending. Therefore, it is vitally important that they know RIO products exist, what they do, and how they differentiate from other forms of later life lending.
Interest on a RIO loan is paid off each month, not ‘rolled up’ into the loan and there is no end date. Potential borrowers need to know they can make interest-only payments until the day they die or enter long-term care. They can also choose to make overpayments of up to 10 per cent per annuum and they can redeem the loan at any time should they wish to do so.
If we want the RIO market to reach its full potential and satisfy greater customer demand, we need both product innovation and more advisers equipped to effectively explain why a RIO is best suited to meet their needs and circumstances.
Later life borrowing is clearly growing at a fast pace and we are fully committed to supporting those who are approaching retirement or are already retired. As part of this, the RIO market is well positioned to become a main stay for later life lending as more entrants offer RIOs and lenders continue to educate and innovate.
Cammy Amaira, sales and marketing director, The Tipton and Coseley Building Society