New product to close market gap
Interest-only mortgages, a once popular product, have virtually become extinct due to tighter lending rules. Similarly, due to new affordability tests, pensioners can also struggle to get a competitive mortgage these days. However, there is a new product launching combining both these market gaps – an interest-only mortgage for pensioners.
Interest-only mortgages are rare
In 2012, there were 2.5 million interest-only mortgages, according to the Council for Mortgage Lenders (CML) and this now stands at 1.9 million after a further crack-down from the Financial Conduct Authority (FCA).
Not only were lending regulations changed to restrict interest-only mortgage lending but a campaign was implemented, and continues, to encourage interest-only mortgage holders to make a solid plan to repay their balance, or switch to a regular mortgage product.
This campaign was put in place as it was believed by FCA regulators that borrowers didn’t truly understand how an interest-only mortgage worked in terms of paying off the capital balance at the end of the loan term.
Now, this once popular product, is rare to come across.
Read more – Interest-only mortgages – are they on their way out?
Retired and seeking a mortgage
Similarly, recent changes to regulations require stricter testing on affordability, which typically matches employment income against outgoings to see if a mortgage could still be affordable for a borrower, even in light of interest-rate fluctuations.
Many people approaching, or already in retirement, don’t meet the new criteria and struggle to either extend their interest-only mortgages or take any form of competitive re-mortgage.
Read more – Are there any interest-only mortgages available for regular borrowers?
Bridging the gap
Shawbrook bank are, however, looking to launch a product to enable pensioners to extend their interest-only mortgages. Clearly certain criteria will still need to be met but they are taking into account wider factors of lending in the aim to fill a market gap.
Other lenders may offer similar products or ones that are more suitable for your requirements. A formal assessment by a qualified mortgage adviser will ensure you are choosing the best product for your situation.
Dental & Medical Financial Services can assess your mortgage requirements and provide sound advice on the best mortgage product for your requirements. Call Chris today for an initial assessment.
Tel: 01403 780 770