OneFamily sees buying property as fourth most popular reason for using lifetime mortgages
Buying a new property is now the fourth most popular reason for using a lifetime mortgage as homeowners who are retired, or approaching retirement, move to be closer to family and friends or better amenities, OneFamily found.
Traditionally lifetime mortgages were primarily used by homeowners to stay in their current home, and release the equity they have built up in their property to fund their retirement. However the product is increasingly being used for a broader range of reasons.
With OneFamily homeowners can choose to pay the interest, meaning they protect the remaining capital in their home, or they can pay nothing and the interest is taken when the loan is closed.
Of the homeowners choosing to use a lifetime mortgage to buy a new property, two thirds (65%) are choosing to pay back the interest on the loan regularly.
Nici Audhlam-Gardiner, managing director of lifetime mortgages, said: “Lifetime mortgages are helping our customers buy properties more suited to their retirement plans, be it living closer to family and friends or the need for a newer property that requires less maintenance.
“A lifetime mortgage can bridge the funding gap that many over 55-year olds have been excluded from by mainstream mortgages as they require affordability tests or are only available for homeowners of a certain age.
“Homeowners are increasingly using lifetime mortgages for a variety of reasons and this particular trend could be being driven by the more flexible mortgages now on offer.
“Alongside buying a new property, we have also seen an increase in homeowners using this product to gift money to family as a living inheritance.”
Upsizers also take the largest loans with homeowners borrowing an average of £117,000 to buy a new property. This compares to an average loan size across all OneFamily lifetime mortgages of £95,000.
The NHBC Foundation found that half (46%) of over 55-year olds choose to move and invest more money in the purchase of their new property, with a third (28%) upsizing to a home with more bedrooms.
Many of those buying larger properties, are moving in with other family members. Multigeneration households have increased by 42% in the last decade, as economic necessity, in particular the rising cost of elderly care and childcare, can be addressed through living together.
In these cases, the interest is often paid on a monthly basis by the younger family members to protect the equity in the property and in lieu of paying their own mortgage.
Audhlam-Gardiner added: “At OneFamily we use customer insight to help develop our products. By doing this we can ensure that the products we offer are meeting a real need amongst homeowners over 55.
“For example, our interest payment product removes one of the biggest concerns homeowners have about equity release as it enables them to protect the capital in their home.”