Shawbrook has launched an interest-only mortgage product for those aged 55 plus who are reluctant to downsize or raid their pension pots to pay off their existing loans.
The 55 Plus Interest-Only Mortgage is aimed exclusively at borrowers aged 55 plus who are nearing the end of their existing interest-only arrangement, but have an outstanding balance.
Borrowers between the ages of 55 and 75 can take out mortgages from £25,000 to £1m (inclusive of fees) up to a maximum loan-to-value of 50 per cent.
The bank is offering five to 15-year variable rates from 5.25 per cent, and three and five-year fixed rates from 5.5 per cent, with the maximum age at expiry of loan set at 85.
The minimum income of the main earner must be £16,500 a year and the minimum property value at inception is £225,000.
While 600,000 interest-only borrowers will see their mortgages mature before 2020, just under half are expected to have a shortfall due to factors such as a reliance on property price growth, which has slowed in recent years.
As a result, some people may have to resort to selling and downsizing their family home or raiding their savings or pension pots, despite having good incomes.
Shawbrook’s solution enables customers to remain in their homes for up to an additional 15 years and leave their pension pots in place for longer, as well as raising additional funds for a wide range of purposes.
Maeve Ward, Shawbrook’s managing director of residential mortgages, said: “For many, the prospect of selling a cherished family home when an interest-only deal is coming to an end is an emotional wrench, especially when the ability to continue paying a mortgage remains.
“We are thrilled to offer a lifeline to this underserved sector with Shawbrook’s new 55 Plus Interest-Only Mortgage. This new product not only provides peace of mind to those who do not want to sell their homes, or withdraw from their pensions, but also gives them the opportunity to borrow further to fund their future plans.”
Ray Boulger, senior technical manager at John Charcol, said: “I think it is good news that we have another lender coming into the market.
"The market for later-life borrowers is still in a market failure situation and the building societies and challenger banks are stealing a march. This is helpful in terms of increasing the options and expanding competition.
“I think we will see more lenders come into the market over the course of the year, which will increase competition and drive down rates.”
simon.allin@ft.com
