Legal and General launches optional payment lifetime mortgage

Michael Lloyd

April 11, 2018

Legal & General Home Finance has launched the optional payment lifetime mortgage (OPLM), allowing customers to pay some or all of the monthly interest whilst remaining in their homes.

Customers can also stop paying at any time and like traditional lifetime mortgages, these interest rates are fixed for life.

OPLM combines the flexibility of residential monthly interest payments with the long-term security of a lifetime mortgage, as customers are able to stop paying interest at any time and remain in their home for the rest of their lives. It reflects the desire of more consumers wanting to pay the monthly interest on their mortgages in retirement.

Steve Ellis, chief executive, Legal & General Home Finance, said: “We’re really delighted to launch the product. I think it’s a transformative product for us.

“We looked at the same customer feedback. It was developed because we wanted to give customers the options and flexibility in retirement.

“Ultimately we want lifetime mortgages to be part of a debate about security and retirement. It’s not about whether a lifetime mortgage is the right product for everyone- it’s about having products for customers to engage and talk about.

“It’s just about having the conversation in retirement. Your house is probably your biggest investment and should be part of the debate. We want a range of products and we’re offering customers the chance to make the payments when they want to.”

OPLM is available to mortgage customers aged 55 and for borrowers with some income in retirement but not enough to qualify under residential mortgage affordability assessments, and for whom traditional interest roll-up lifetime mortgages may not be an immediate solution.

Ellis added: “We’ve built it because we hear from our research there’s lots of customers who want the ability to make repayments but can’t repay the loan.

“We think it will be popular and customers want more control and want to continue making payments with security of fixed for life.

“These customers feel let down by the mortgage market – they have always paid their interest, but no longer qualify for a new mortgage because of affordability assessments or, more simply, their age.

“OPLM is a direct response to this growing customer need for a different kind of retirement mortgage, one that provides flexibility for borrowers and which also has the potential to address the interest-only shortfall that remains a fundamental issue for the mortgage market.”

It has also been designed to respond to the FCA’s request for the market to offer more choices for customers wanting to borrow in retirement. This is something the FCA highlighted in its recent rules on retirement interest-only mortgages.

Ellis said: “The launch of OPLM and the positive move from the FCA on retirement interest-only mortgage rules clearly shows that Legal & General is part of a wave of innovation in the later life lending market.

“We actually hosted the FCA and we’re really pleased regulators are taking a proactive interest in our market and trying to give the flexibility to open it up.”

The product will only be available via intermediaries and on an advised basis.

Customers will not need to pass any affordability assessments or have a capital repayment strategy in place as the amount owed is repaid from the sale of the property upon death or moving out of the home into long-term care.

In the event that they can no longer afford or want to pay their monthly interest repayments, the customer can choose to stop and instead the interest is added to the loan each month.

Jon Tweed, sales director of lifetime mortgages at OneFamily, said: “I’d say this is great news. We welcome any additional features and choice for customers. We’ve had an interest paying option available and it’s great to see a larger lender following suit, giving more options for customers.

“I think as mortgage customers start to realise there’s these options available in the lifetime mortgage sector, there’ll be more uptake of them.”

Paul Norcott, head of mortgages & insurance, The Co-operative Bank, said: “The FCA  has  recognised  that  there  needs to be solutions in place to support  interest-only  mortgage  customers as they enter retirement and we welcome  this  innovation  from Legal & General.”

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