Santander will extend the maximum interest-only mortgage lending age from 65 to 70 from next Tuesday (7 February).
The company said this would “cement” its commitment to older borrowers and that the change is designed to offer interest-only customers “greater choice” in how they manage their mortgage repayments, while also supporting borrowers who want to take advantage of the current low interest rates in the UK.
The new policy applies to customers who choose to have any part of their mortgage as interest-only.
Miguel Sard, managing director of mortgages at Santander UK, said: “As a responsible lender, we work hard to support all areas of the market. We know that the lending landscape is changing, people are living longer and want access to borrowing into later life.
"By extending the age limit on our interest-only mortgages, we hope to meet the needs of this growing customer group, offering them more choice in how they manage their mortgage.
“Interest only may not be right for everyone, but we have seen appetite for these propositions grow in recent years and this change will support customers who choose this method of repayment.”
Last month Santander revealed that its net mortgage lending was more than £1bn lower in 2016 after its decision to focus on customer service.
The bank said it saw "strong inflows" in net mortgage lending during the year, driven by buy-to-let demand and lower redemptions, but this was offset by "management pricing actions" which hit its mortgage approvals.
A flood of interest-only mortgage maturities in 2017 has been predicted to “turbo-charge” the equity release market, with one provider predicting demand could more than double over the year.
Jeremy Duncombe, director at Legal & General Mortgage Club, said: “Santander’s decision to increase its maximum interest only mortgage lending age from 65 to 70 is welcome news for older borrowers trying to make their way in the mortgage market.
“As people are living and working for longer, often past retirement age, it is only right that lenders respond appropriately to the changing demographic of borrowers. It is great to see a mainstream lender like Santander adapt their products to meet the needs of its older customers, giving them another option when borrowing in retirement, and we expect to see more lenders follow suit.
“Whatever the age of the borrower, it’s important to remember that there is a place for interest-only mortgages, as long as these products are considered with careful, professional advice and borrowers have a repayment plan in place to pay off their debts.”
Ishaan Malhi, chief executive and founder of Trussle, said “Many lenders have already increased the maximum lending age, and to see another high street lender is a reflection of them acknowledging people are now learning later on in their lives and property prices are being pushed up higher. And, they are just showing that they are being flexible around their criteria in response to what is happening in modern society.”