Back to July 2019

Leeds adds unique 15 year fixed rate mortgage to Retirement Interest Only range

The longest fixed rate mortgage on the market is the latest innovation by Leeds Building Society in the Retirement Interest Only (RIO) sector.

The Society launches its new 15 year fixed rate RIO deal on Tuesday, 30 July, following strong demand from later life borrowers for longer term fixed rates.

Leeds Building Society was the first national high street lender to enter this market and has since led innovation in this sector, being the first provider to introduce five and 10 year fixed rate RIO mortgages, as well as RIO deals with cashback.

In addition, the Society has continued to refine and improve its lending criteria for RIO in response to borrower and broker feedback, including allowing the use of income drawdown pensions and SIPPs when assessing borrower affordability.

Since Leeds Building Society entered this market a year ago:

  • the monthly total of applications received has increased by 83%, rising month on month during 2019
  • nearly one in six (17%) of its RIO mortgages is a 10 year fixed rate
  • 70% of its applicants are seeking a fixed term of at least five years
  • the top three reasons for applying for a RIO mortgage are to fund home improvements (39%); a like for like remortgage (22%); and debt consolidation (22%)

Matt Bartle, Leeds Building Society’s Director of Products, said the past 12 months had exceeded performance expectations he and his team had set for what was an untested sector.

“While Retirement Interest Only was a completely new market, guidance from the regulator and our own extensive research led us to expect strong demand,” said Matt.

“Bearing in mind the UK’s demographic and the changes to how people are managing their financial commitments during later life, we anticipate the demand for Retirement Interest Only will carry on increasing as older borrowers seek greater choice, alongside more established options such as equity release and lifetime mortgages.

“The last 12 months bears this out and we’ll keep our product offering and lending criteria under review so we can support more borrowers wanting to make use of this type of home loan.

“As a mortgage lender for more than 140 years, we’ll use our expertise and experience to carry on meeting the needs of more borrowers to enable them to have the home they want.”

Leeds Building Society accepts RIO applications from borrowers aged between 55 and 80 and its range includes fixed rate deals for two, five or 10 years (with 15 year fixed rate from 30 July), with a choice of fee and incentive combinations, including cashback.

Ends

Notes to Editors

Key features

4.54% No Fee Retirement Interest Only 15 Year Fixed Rate up to and including 30 November 2034

  • 10% penalty free capital over-repayments permitted each year
  • Tapered early repayment charges – 6/6/6/5/5/5/5/5/4/4/4/3/3/2/2% until 30/11/2034
  • Available both for purchase and remortgage applications
  • Repayment method is sale of the property
  • Available for customers aged 55-80 at application
  • No product fee

4.34% Retirement Interest Only 15 Year Fixed Rate up to and including 30 November 2034

  • 10% penalty free capital over-repayments permitted each year
  • Tapered early repayment charges – 6/6/6/5/5/5/5/5/4/4/4/3/3/2/2% until 30/11/2034
  • Available both for purchase and remortgage applications
  • Repayment method is sale of the property
  • Available for customers aged 55-80 at application
  • £999 fee

Retirement Interest Only mortgages

The Financial Conduct Authority (FCA) introduced the first definition of what constitutes a Retirement Interest Only mortgage in 2018 and introduced specific regulations for this market.

A Retirement Interest Only mortgage will be repaid on a specified life event, which can include the sale of the property, moving into residential care, or the death of the borrower.

The regulations clarify the difference between Retirement Interest Only and lifetime mortgages – unlike a lifetime mortgage, the interest on a Retirement Interest Only mortgage cannot be rolled up so the borrower will have to demonstrate interest only repayments are affordable throughout the length of the loan.

For more details of Retirement Interest Only mortgages and how they compare to other later life lending, visit: http://www.leedsbuildingsociety.co.uk/mortgages/retirement-mortgages/

To discuss a new case with one of our mortgage development team, mortgage introducers should go to www.leedsintroducer.co.uk to find details of their nearest Business Developer contact.

Leeds Building Society won the title of Best Shared Ownership Mortgage Lender in the 2019 What Mortgage Awards, its fourth consecutive year of success in this category.

Leeds Building Society operates throughout the UK and in Gibraltar and has assets of £19.4bn at 31 December 2018 (£18.5bn at 31 December 2017). The Society’s head office has been based in the centre of Leeds since 1886.