Saffron BS launches interest-only mortgage

Saffron BS launches interest-only mortgage

Saffron Building Society has launched an interest-only mortgage for people looking to downsize and borrow into their retirement. 

The ‘Lending into Retirement Downsizing’ mortgage allows customers to use downsizing as their repayment vehicle, with the ability to repay the loan after they have retired. 

The product offers a three-year discount rate at 2.94 per cent on a 60 per cent loan to value. It has a £999 arrangement fee and carries an early repayment charge of 2 per cent for three years. 

Saffron BS requires applicants to have a minimum of £250,000 equity in their property, but will consider lower amounts when alternative assets are in place. 

Anita Arch, Saffron Building Society’s head of mortgage sales, said: "Some people don’t think it’s possible to get a mortgage in their 50s and 60s as retirement approaches.

"At Saffron, we don’t believe you should be limited by your age and we like to be as flexible as possible.

"You may be approaching retirement and have seen a property you want to call home but lenders have already said no. We say, let’s talk further and see what we can do to help."

The loan has a minimum mortgage term of five years, with the maximum term determined by Office for National Statistics tables. 

Scott Gallacher, chartered financial planner at Rowley Turton, said: "With an ever ageing population, developments such as Saffron’s ‘Lending into Retirement Downsizing’ mortgage are a welcome addition."

But he cautioned: "Naturally there is the risk that house prices fall and then downsizing might not be an option to release sufficient funds to repay the mortgage."

He added: "Also, I wouldn’t be that surprised if, in years to come, some people later claim they didn’t realise they were on an interest-only mortgage.

"And they are ‘devastated’ to learn that repayment of the mortgage will use up a large part of funds released by downsizing."