Hodge Lifetime has launched a new over-55s interest-only mortgage to help so-called ‘mortgage prisoners’ who have reached the end of their current interest-only deal and have no way of repaying the capital.
According to the Financial Conduct Authority, as many as one in five UK mortgage borrowers is facing a shortfall in their repayment plans. In many cases, their only way of repaying the debt will be to sell their home or cash in pensions or other investments.
It says there are a total of 1.7 million borrowers with either a full or partial interest-only mortgage, approximately 70% of whom are over 45.
The new residential interest only mortgage from Hodge Lifetime – which specialises in later life lending – will be available to those who have reached the end of their current interest-only deal, as well as those who are looking to remortgage an existing property or buy a new one. Often these borrowers will struggle to get a mortgage from other lenders because they do not meet the age criteria.
Under the deal, borrowers are only required to repay interest on the loan until they either die, or their home is sold and they move into long-term care. It is only at this point that the capital is repaid.
In order to reduce this debt, borrowers also have the opportunity to make overpayments of up to 10% of the loan each year.
Three- and five-year fixes are available with rates starting from 3.44%. The maximum LTV is 60% with loans available from £20,000 to £500,000 and the minimum property value is £100,000.
Steve Cox, business development director at Hodge Lifetime, says: “The launch of the 55-plus retirement interest-only mortgage means borrowers over the age of 55 now have more options when it comes to managing their finances. Now, they will be able to remortgage or take out a new mortgage with no restrictive end term in place, which means borrowers as old as 85 could still remortgage.”
“Until now, our ageing population has been underserved by mortgage providers and they have had limited choice when it comes to borrowing later in life, a time when their borrowing needs are more complex; this is simply unfair. Many homeowners later in life are asset rich but cash poor and it’s at that point more than ever that they need flexibility when it comes to managing their mortgage and finances.”