Exploring Retirement Interest Only
By: James Chutter, Corporate Account Manager
Retirement Interest Only (RIO) has been a popular talking point recently. Despite volumes not achieving what the FCA (Financial Conduct Authority) first predicted, there are signs that this part of the market still has room to grow and improve.
At Leeds Building Society, we’ve supported RIO since its launch in July 2018, and have been able to continue to do so throughout the pandemic. According to MoneyFacts research, more lenders are coming into the RIO space, with 22 providers offering 109 RIO products, up from the 74 deals available in February 2020. This can only be good news for customers and brokers alike; offering more choice and different affordability models for brokers to match to their customers’ circumstances.
What does the future hold for RIO mortgages?
Although RIO is still in the early stages of its development, there is growing interest. Advisers and compliance teams are still finding where it fits for their customers, in between a standard and later life solution. There is appetite from brokers on both sides of residential and later life borrowing to further understand the RIO proposition so that they can provide holistic advice to their customers and explore every option for them.
Affordability is a key factor for making RIO more accessible, especially for joint applications where the lowest sole income is used for assessment. More flexibility in assessing the customer’s full income and looking at ways to use more of the joint income would help support customers in this sector.
What are the opportunities?
- UK Finance figures show there are approximately 60,000 interest only mortgages maturing in 2021.
- RIO is an alternative to equity release for borrowers with a retirement income, who want to retain equity for their family’s inheritance.
- Customers can use RIO mortgages for a wide range of purposes such as purchase, remortgage, debt consolidation, home improvements or large purchases like a holiday.
- Product transfers are available so customers can switch to a new fixed product when their existing deal expires.
What support is available to you?
It’s important that lenders, clubs and networks continue to support brokers by providing training and information so that brokers are able to identify when a RIO product may suit a customer. That’s why we created a RIO Hub on our website which is designed to support advisers with information to complete their first RIO application from start to finish.
‘Who’s right for RIO?’ can help with identifying target customers and a step by step guide and videos which focus on the extra regulatory considerations is a must see for any adviser looking to complete their first RIO application.
THIS INFORMATION IS FOR USE BY FCA AUTHORISED INTERMEDIARIES ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL BORROWERS