First fixed-for-life Rio brought to market

First fixed-for-life Rio brought to market

Specialist lender Hodge has launched a retirement interest-only mortgage with a fixed rate for life — a first for the UK mortgage market.

The product, named the Hodge fixed-for-life Rio, aims to give customers security throughout their retirement as they can lock into a fixed rate for the entirety of their Rio mortgage.

According to Hodge this means consumers can safeguard their retirement from interest rate rises and have assurance over their monthly costs.

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Rio mortgages are designed for borrowers looking to mortgage their home in later life. Customers pay monthly interest payments on the loan until they either pass away or move into care, when the capital of the loan is paid off with the sale of the property.

Hodge’s new product is available at a fixed-rate of 4.35 per cent with an arrangement fee of £995 with a maximum loan-to-value of 70 per cent, or without arrangement fee at a rate of 4.55 per cent.

Both versions of the fixed-for-life Rio offer a free valuation up to £1m with a maximum property value of £3m.

Overpayments of up to 10 per cent are allowed and the product offers downsizing protection, meaning consumers who repay the loan as a result of selling their home to move property will not pay early repayment charges.

The Rio is available to consumers aged between 50 and 88 and can only be accessed through adviser and broker networks.

Matt Burton, managing director of mortgages at Hodge, said: “We’re proud to have launched one of the first Rio products to the market back in 2018, and excited to once again revolutionise the space with the first ever fixed-for-life Rio mortgage.

“The fixed-for-life Rio has been created as part of our core mission to provide certainty in uncertain times for those planning their future.”

Mr Burton said the product had been designed after receiving feedback from customers who said they wanted security in retirement.

Rios were given the green light by the Financial Conduct Authority in March 2018 when the regulator decided to treat them as standard mortgages rather than under equity release standards in an effort to increase the uptake in the market.

But questions were raised recently as data from the FCA showed a mere 241 consumers had opted for a Rio in the first quarter of this year and some advisers said thousands of borrowers would struggle to meet the affordability criteria for the Rio.

The launch of long-term fixed rates comes as little surprise as just last month brokers predicted the mortgage market was likely to see more and lengthier long-term fixes as lenders aimed to cash in on a potential period of low interest rates.

The thoughts came as Virgin Money launched a 15-year fixed rate mortgage product — the first in the market for a decade — and Leeds Building Society brought a 15-year fixed Rio to market.

Advisers thought the rise in more long-term products coming to market was a sign lenders were predicting interest rates would stay low for the foreseeable future.