Leeds Building Society has launched two 10-year retirement interest only (RIO) mortgages and changed some of its previous criteria.
The 10-year RIO mortgages include a 3.99 per cent fixed rate available at up to 55 per cent loan to value (LTV) and 4.09 per cent fixed rate at up to 55 per cent LTV with a £500 cashback.
Both products, available for customers aged 55 to 80 at the point of application, come with a free valuation and £999 product fee.
Other features include 10 per cent penalty free capital over-repayments permitted each year, tapered early repayment charges of between 6 per cent and 2 per cent until May 31, 2029 and no maximum term.
The maximum loan amount is £1m.
Leeds will now also consider income drawdown plans and self-invested personal pensions (Sipps) when assessing income for applications.
A retirement interest only mortgage will be repaid when a specified life event occurs, usually moving into residential care, or the death of the borrower.
The society was one of the first national high street lenders to enter the RIO market in July, following research into lending into later life.
Matt Bartle, director of products at Leeds Building Society, said consumers were increasingly seeking longer-term RIO products.
He said: "As a result we’ve introduced two new ten-year mortgages, one with a cashback option to ensure we continue to offer choice to consumers and help meet the needs of their own individual circumstances.
"The consideration of appropriate drawdown plans and Sipps during the affordability assessment is another example of providing increased flexibility for those looking at retirement interest only mortgages as an option."
Norman Stevenson, director of Cathedral Independent Financial Planning and specialist later life adviser, said whilst RIO and equity release currently made up just a small part of his business, this was growing.
He said: "These mortgages from Leeds are a good example of the increasing demand for these types of products.
"Most equity and wealth is owned by older people who want to find ways to better their lifestyle and pass money on to the next generation, with many now becoming less reluctant to consider interest-only arrangements as an option."
Dippy Singh is a freelance reporter for FTAdviser
