Product Adviser  

Nationwide market entry 'significant'

Nationwide market entry 'significant'

Nationwide choosing to enter the retirement interest-only market is a significant development.

Earlier in the year when the Financial Conduct Authority changed its rules on these types of mortgages, allowing brokers to advise on them without equity release permissions and allowing lenders to lend with an indefinite term, we saw relatively little innovation from lenders immediately.

The only lender to market these products heavily to brokers was Leeds Building Society.

Having a mainstream high street lender on board sends a strong signal to the rest of the market, and hopefully will encourage other lenders sitting on the fence to commit the resources and launch their own products.

In terms of the product itself, I think it works extremely well now, given interest rates are very low. However, I am concerned about people's ability to fund loans on fixed incomes should interest rates rise.

Another concern is that this might further clog Britain’s already broken housing system, encouraging older people to remain in large homes they would otherwise be forced to sell.

The current cost of moving, inadequate property for older people such as bungalows and secure apartments, and the cost of stamp duty on new property means older people are not incentivised to downsize, and really only do so when forced financially.

Giving them an option to remain indefinitely is ideal for them personally, but not for the wider housing market.

Ultimately, options for consumers are always a good thing, and overall I feel this will have a positive effect on the mortgage market, both increasing customer awareness of the products and encouraging competition. 

Stuart Phillips is a principal of Aalto Mortgages