Leeds Building Society has launched a retirement interest only mortgage and has said it will commit to rewarding brokers for product transfers in this category.
The building society will offer three retirement interest-only mortgages at fixed rates of either two, three or five years, to borrowers aged between 55 and 80 years old.
The loan will be repaid on a specified life event, such as sale of the property, moving into residential care or the death of the borrower and is part of the lender's move to offer older borrowers more choice following the Financial Conduct Authority's (FCA) recommendations on later-life lending.
In March 2018, the FCA announced its recognition of retirement interest-only products as standard mortgages rather than assessing them under more stringent equity release standards.
As a result of the clarification, a handful of lenders have slowly begun to introduce retirement interest only products into their offerings - but Leeds claims it is the first to commit to rewarding brokers for retirement interest only product transfers - the lender will pay advisers a fee for the business.
Jaedon Green, director of product and distribution at Leeds Building Society, said he welcomes the FCA guidance.
He said: "As the UK’s population ages and lifestyles and expectations change, we welcome the regulator’s acknowledgement that the needs of borrowers and homeowners will continue to evolve.
"Similarly, lenders need to remain responsive to these changes, and in how they can support consumers, and our broker partners have an important role to play in what we see will be a growing market."
The society's retirement interest-only mortgage will initially only be available through brokers, a move Mr Green said reflected the personal decision involved in choosing a mortgage and the need to seek appropriate advice.
He said: "It is important that customers have access to broker support throughout the life of their mortgage, which is why we’re committed to providing intermediary product transfer capability.
"As consumers considering this product are older, they may need more support in reviewing their wider financial circumstances and require specific financial and legal advice on aspects such as pension arrangements, estate planning and future costs for social care."
Steve Ellis, chief executive at Legal & General Home Finance, said the FCA’s introduction of retirement interest-only mortgages is a positive step forward for later life lending that will only provide more options for consumers who want to continue borrowing in retirement.
He said: "These changes by the FCA clearly signal the regulator’s engagement in this sector and we welcome its willingness to work with industry to improve access to mortgages in retirement."
Mr Ellis stressed it is important to note that retirement interest-only is just part of the solution for customers, believing further innovation is needed to deliver products that meet the real life needs of retirees.
He said: "Whether its optional payment lifetime mortgages or more traditional equity release products, lenders, brokers and industry bodies all need to work together to ensure consumers have access to a range of flexible solutions that reflect the varied nature of today’s retirement landscape."
rachel.addison@ft.com
