Legal & General is to offer lifetime mortgages to the Co-op Bank’s interest-only mortgage customers aged 55 and over who are approaching retirement.
Under a five-year agreement, the bank’s customers with interest-only mortgages will be introduced to L&G Home Finance’s advised lifetime mortgage products.
The products will be available to help borrowers who are facing difficulty paying off the outstanding capital from their interest-only mortgage or keeping up with mortgage repayments in retirement.
They will also be available to other customers who may wish to release equity from their home for a range of reasons.
Interest-only mortgages, which require borrowers to pay off monthly interest but not capital, were popular with homebuyers in the years leading up to the financial crisis.
But many of those who took out the loans failed to put adequate repayment plans in place, leaving them in danger of repossession.
In 2012, regulations were introduced to ensure the mortgages could not be sold without a repayment plan, leading to a decline in their popularity.
The Council of Mortgage Lenders – now known as UK Finance – revealed more than 300,000 borrowers had interest-only loans worth more than 75 per cent of their homes in 2016.
Lifetime mortgages - a loan secured on a home that does not need to be repaid until the borrower dies or moves into long-term care - is one means of helping customers struggling to repay their interest-only loans.
By choosing to take out a Legal & General lifetime mortgage and using the product to pay off their interest-only mortgage debt, Co-op Bank customers will no longer have to pay any monthly interest payments.
Customers will be offered advice by equity release experts The Retirement Lending Advisers, who are part of Key Retirement Solutions.
The Co-op’s interest-only customers will not be charged an advice fee, and those who decide to take out a lifetime mortgage will not be charged valuation or arrangement fees.
Steve Ellis, managing director of Legal & General Home Finance, said: “I am delighted to announce this new partnership with The Co-operative Bank, which follows last year’s pioneering agreement with Santander.
“We were incredibly proud to be the first lender to secure an agreement of this type, but we always intended to launch further partnerships like this to enable more people to benefit from the positive impact releasing equity can have on retirement.”
Will Hale, chief executive of Key Retirement, said: “Over the last 12 months we have seen a significant increase in customers approaching us to look at solutions for re-paying maturing interest-only mortgages and we expect this trend to continue.
“It is encouraging to see major lenders such as The Co-operative Bank recognise the importance of specialist advice in this area and be proactive in helping their customers explore the options available to them.”