Later Life  

Building society launches Rio-beating mortgages

Building society launches Rio-beating mortgages

Hinckley & Rugby Building Society has launched two residential mortgages for later life borrowers that are more competitively priced than any retirement interest-only deal currently available.

The deals have the option of interest-only for up to 60 per cent of the property value.

The lifetime discount and two-year fix further develop the society’s later life offer following its removal in November of any maximum age limit for the term end of its entire range of mortgages, including buy-to-let.

The lifetime discount has an initial pay rate of 2.79 per cent. The two-year fix is priced at 2.99 per cent.

The new products are specifically for later life borrowers who will be over 75 at the end of the term.

Both have fees of £199 on application and £800 on completion, with free valuations up to £1m.

Both have a maximum LTV of 80 per cent. For buyers who are downsizing, up to 50 per cent can be interest-only.

For cases where the proposed mortgage repayment vehicle is the sale of a different property, the interest-only element can be up to 60 per cent.

Ray Boulger, senior mortgage technical manager of John Charcol, said although these two later life products are not retirement interest-only mortgages (Rios) they have some features of a Rio and are priced more competitively than any Rio currently available.

Mr Boulger said: "Products like these are a good example of why brokers need to consider all the different types of mortgage available (including Lifetime) for later life clients wanting an interest-only mortgage.

"With later life lending the lender’s criteria and ability to assess affordability over the long term is critical and this is an aspect where the computer driven lenders struggle to compete with the manual underwriting offered by smaller lenders like Hinckley & Rugby.

"Notable features of both these new products are that they have no early repayment charge (ERCs) but one factor to bear in mind is Hinckley & Rugby’s very high standard variable rate (SVR) of 6.14 per cent.

"This is not a problem with the lifetime discount but makes it very important that anyone choosing the two-year fix effects a product transfer or remortgages before the fixed rate ends.

“However, as the Rio market gets more competitive over the next couple of years, with more lenders entering the market and the likelihood of a wider choice of fixed rate terms and cheaper rates, a mortgage with no ERCs has the benefit of allowing a switch at any time if an attractive alternative is launched."

emma.hughes@ft.com