The retirement mortgage is an interest-only lifetime loan which does not require capital repayment until the borrower dies or moves permanently into long-term care, although customers must pay the interest each month.
The initial rate of 4.75 per cent is fixed for five years after which it moves to a standard variable rate. After the initial five years, the loan can then be repaid with no early repayment charges.
Customers can borrow up to 50 per cent of the value of their property or £500,000, whichever is lower.
Mortgage Strategy revealed in July that the product was in the pipeline and after a pilot launch in August, the new product is to be rolled-out to the wider market today.
The retirement mortgage is the firm’s alternative to their own equity release range and aims to bridge the gap between a traditional residential mortgage and a traditional equity release plan.
Hodge Lifetime managing director Deian Jones says: “The current range of equity release products caters very nicely for the asset rich, cash poor customer. For those fortunate to be entering retirement with decent pension provision, the retirement mortgage offers a credible and flexible alternative to the more traditional equity release plan.”
Equity Release Club & Later Life Academy managing director Stuart Wilson says: “I believe we are going to see a lot more innovation over the next 12 months and this product really focuses on market needs.
”Lenders have been panicking over how to lend to the older end of the market – especially with the FCA looking so closely into the world of interest-only loans and I feel like this kind of innovation is what the market needs.”
“My only slight reservation is that brokers need to have a solid understanding of the needs of older clients and I think selling this product as a traditional residential mortgage would be the wrong way to go about it as it simply isn’t that. If we can get a mix of the right people with the right knowledge base working on products like this, it should stand the market in good stead.”