Aldermore will launch a later life product for applicants between 55 and 85 – as an alternative to equity release.
The range, launching on Monday, will have a maximum loan-to-value of 75% for capital repayment, 65% for interest-only and rates from 3.38%. There will be fixed rate options and the mortgage can run until customers are 99.
The proposition will initially be distributed through Openwork, PTFS, Finance Planning Group and AToM.
Charles McDowell (pictured), commercial director of group mortgages at Aldermore, said: “This is not equity release – this is a standard residential mortgage.
“We are providing an alternative to equity release.
“There’s been a drumbeat of demand for this type of product from brokers.”
He went on to say that a key focus behind the range is servicing borrowers with an expiring interest-only loan.
Aldermore and its distributor partners briefed brokers on the product launch today.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, praised Aldermore for innovating – with a strategy of moving “gently down the road” by dipping its toe in the water through limited distribution.
He noted however that advisers should look at all the options for clients, whether that’s an equity release or later life option, and refer customers elsewhere if necessary. Marie Catch, mortgage development manager at Legal & General, agreed.
Dan Maskell, director of Finance Planning Group, accused some interest-only customers of having their heads in the sand, and later described equity release as a “last resort” compared to a residential product.
Dale Jannels, managing director of AtoM, reckoned the product perfectly fills the gap between residential and equity release.
The product range will feature 2, 3, 5 and 10-year options on a fixed and variable rate basis.
With the 10-year product there will be no early repayment charges after five years.
Affordability will be assessed based on the income at the outset of the loan if the borrower has not already retired, as well as actual or anticipated retirement income – the lowest outcome will determine the maximum loan amount.
Aldermore will have an online calculator to help brokers assess their clients’ suitability.
Over-65s are the fastest growing demographic in the UK, while nine in 10 are living mortgage free.
More 2 life predicted the retirement lending market to grow from £65bn in 2017 to £142bn by 2027.
McDowell gave no specific timeframe on when this period of limited distribution period would end.