MBE Leeds: RIOs will take off once major lenders are on board
After a slow start uptake of Retirement Interest-Only mortgages will grow significantly once mainstream lenders start offering the product, a panel at Mortgage Business Expo Leeds agreed.
Nationwide Building Society was first big six mortgage lender to launch a RIO mortgage last month, while Leeds Building Society entered into the market in June 2018.
However just 112 RIO policies were sold last year.
Graham Carter, head of lending at Beverley Building Society, said: “I think the market is there; I think it will grow.
“Once one of the bigger lenders will enter that’s when we will start to see it increase further.”
He added that the aging nature of the population and changing lifestyles for older people should mean there’s potentially plenty of demand for a RIO. The long-term nature of the mortgages also makes them commercially viable, as they can be a long-term earner for a lender.
Ben Williams, corporate relationship manager at Coventry for Intermediaries, said: “It will be a big market. It’s about customers being aware of what’s open to them. As soon as one or two at the top enter that market it will grow.
“The appetite and marketing will be there. Coventry did equity release mortgages pre-financial crisis so we have experience of later life lending – it’s not something we’re adverse to at all.”
He added that so far the top 10 lenders have a reluctance to get involved owing to the small size of the market, as well as potential conduct issues down the line when customers get older, as well as dealing with other family members.
He added: “There are things we’ve got to overcome but it will get there and become more mainstream in years to come.”
Darren Ditchburn, director of distribution at Darlington Building Society, agreed that RIOs definitely have a place, especially for people who don’t have enough equity to take out an equity release mortgage.