Pensions  

Funding push to fuel ‘trapped’ interest-only solution

Funding push to fuel ‘trapped’ interest-only solution

Dave Harris, managing director of More 2 Life, says extra funding heading in the provider’s direction from institutional investor backers means it can “innovate in the retirement lending space”, including lining up a solution for ‘trapped’ interest-only borrowers.

In the latest FTAdviser interview, Mr Harris said new entrants to the market, such as Legal & General, show lifetime mortgages are “the edge of quite substantive growth, both on the supply side, in terms of new entrants, and funders.”

He said this would allow it to look at the “greenhouse of ideas” it has been working on, including innovation around how “equity release loan and drawdown within an equity release loan can sit alongside a person’s pension pot”.

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Mr Harris also cited “various things we can do” to meet pent up demand from “people over 55 who find they are coming to the end of their interest-only mortgages or are struggling to get credit”.

The issue of ‘trapped’ borrowers, in particular those heading towards or in retirement with an interest-only mortgage, has been a big issue since the Mortgage Market Review came in, with many complaining of unnecessarily stringent affordability tests and credit refusals.

Recently HSBC was hit with a landmark decision by the ombudsman, which ruled it must review a decision to refuse an interest-only mortgage for a couple who had substantial equity in their property, on the basis the loan would persist into retirement for the husband.

In March the FCA said it would continue to review how its MMR rules are being interpreted in practice, including in relation to existing borrowers being refused new loans.

Speaking to FTAdviser’s Emma Ann Hughes, Mr Harris said: “Smaller manufacturers, such as More 2 Life, we operate by funding being made available from third parties.

“There is certainly a lot of interest there and from More 2 Life’s perspective I am hoping that will put us in a strong place in the very near future to bring innovative products to the market.

“We have listened carefully to what consumers and advisers feel is necessary... specifically the concept of how an equity release loan and drawdown within an equity release loan can sit alongside a person’s pension pot to give a more holistic approach.

“As many people over 55 find they are coming to the end of their interest-only mortgages or are struggling to get credit in their retirement years there are various things I think we can do there to innovate in the retirement lending space.”

emma.hughes@ft.com