The start of 2019 has seen the retirement interest-only mortgage market gain popularity, with building societies taking the lead.
March 2019 will mark the one-year anniversary of the reclassification of RIOs by the Financial Conduct Authority and following a fairly slow start, several lenders have now joined the sector.
RIOs allow borrowers to pay monthly interest on their mortgage until they die or go into long-term care, at which point the mortgaged property is sold as a means to repay the loan.
The regulator reclassified the products last year to treat them as standard mortgages rather than under equity release standards.
According to research from Moneyfacts, there are now 38 RIO mortgages available launched by 12 providers, only one of which is not a building society.
Darren Cook, finance expert at Moneyfacts, said: "After the FCA gave the green light on RIOs, there were expectations that these types of mortgages would be widely available as an additional option to borrowers.
"However, providers were initially slow to introduce RIO mortgages to the market, with only five products having been launched by two providers by July 2018, three months after the go-ahead.
"Moneyfacts research now shows that there are 38 individual RIO products available in the market, launched by 12 providers, of which all are building societies apart from Hodge Lifetime (a specialist retirement product provider)."
The Nottingham and Ipswich Building Society were the latest to launch RIO products, joining the likes of Saffron, Leeds and Newbury, all of which launched products in February.
Earlier research from Moneyfacts found more and more lenders were scaling back restrictions put in place during the 2008 financial crisis.
It found the number of mortgages permitted to end when borrowers are aged between 80 and 84 years had gone from zero in 2014 to 1,078 products in January.
The data revealed there were now eight times as many mortgage deals to choose from than five years ago, rising from 33 products in February 2014 to 263 in January 2019.
Mr Cook said: "The reclassification of RIO products from under the equity release umbrella in March 2018 must have been a welcome relief for those borrowers who may have reached the end of their interest-only mortgage at an older age and would have had few options open to them.
"Despite our research showing that building societies have been nearly the only driver of the RIO market since its inception, with only three of the 38 total products being offered by a non-mutual, it seems that the older borrower market is also benefiting from banks and building societies scaling back their criteria on interest-only mortgages, as well as extending the maximum age at end of their non-RIO mortgages beyond 80 years of age.
"Even though non-RIO mortgages with extended age terms do not exactly fit the Financial Conduct Authority’s RIO definition, it seems mortgage providers that don’t offer RIOs are still relaxing their lending criteria on maximum age in line with the spirit of what the FCA is trying to achieve."
