They have approached the mortgage industry to look at solutions for interest-only mortgages that last until you die.
Retirement interest-only mortgages would be available to people over an agreed age. The FCA’s initial though are that they would be available to people over the age of fifty-five or sixty. Borrowers would need to show that they could afford the interest payments. This could be an issue when many people see their income reducing in retirement. The capital might then be repaid from the sale of the property. This may be after a “life event” such as moving into a care home or on the death of both parties to the mortgage.
The Financial Conduct Authority does not place any restricts on lenders but in the past has not encourage lenders to provide them. Some lenders offer interest only loans but these need to be repaid in full by an agreed age, usually eighty. Some mortgages are classified as equity release products, which restricts many brokers being able to offer them. Equity release brokers need additionally qualification to be able to advise on them.
The FCA hopes that by classifying these new retirement mortgages as standard mortgages that this will create more interest from both mortgage brokers and mortgage lenders.
Equity release products allows the interest to be added to the mortgage. The mortgage is repaid in full usually when you move into a care home or on death. With the interest only retirement mortgages proposed you will pay the interest as you go.
Not always. Older people often have wealth built up in their house. A way to access this without the need for downsizing could be these proposed mortgages. The money could be used for care fees or home improvements to the home to prolong independent living. Also, older people who have interest-only mortgages that are about to mature could extend these to the new retirement mortgages.
The FCA’s consultation runs with the mortgage industry until the 1st November 2017. After which it will publish its responses and issue new policy guidelines.
Peter Anstee Business Development Manager at Anstee & Co said-
“We would welcome any changes that allows people more flexibly with their mortgage repayments. I feel that the FCA has eventually woken up to the fact that many people who have interest only mortgage do not have a suitable repayment plan in place. Just selling your house and downsizing is not always the answer. This is the first step in providing many people with a solution. However we need to see what they finally propose.”
We have a team of mortgage advisers who are already qualified to offer equity release products. We are aware that everyone’s situation is different so we feel that the best way forward is to arrange to speak to one of our expert advisers. The first meeting is free of charge. At this initial meeting, we will get to know your situation and talk through possible solutions.
We have offices in Kettering, Stamford and London. We also make use of meeting rooms in Warwick, Wellingborough, Northampton and Bedford. Meetings can also be arranged at your home if that’s more convenient. So why not contact us today.
Anstee & Co are members of The Equity Release Council.