Do Retirement Mortgages Still Exist in the UK?September 25th, 2013
Retirement mortgages are mortgages that are especially designed to suit pensioners and there is a need in the market for niche retirement mortgages. The popularity of the Halifax Retirement Home Plan mortgage was testimony to this. However, after the withdrawal of this form of Halifax equity release scheme there are very few options left for those looking for specialist retirement mortgages. The short answer, however, is yes there are some retirement mortgage options still available in the UK, but limited.
The long answer requires you to look carefully at the different options available and find a solution that can suit your individual needs. The current trend among traditional mortgage lenders is to reign in retirement mortgages before the oldest applicant reaches age 75. There are some lenders that agree to lend beyond this, but they need to be convinced that you will have adequate income to be able to cope with payments and have sufficient equity remaining after the retirement mortgage is granted.
Stonehaven offers an interest only lifetime mortgage that is a good alternative to the Halifax retirement mortgage. The Stonehaven Interest Select plan is an interest only lifetime mortgage, on which interest can be repaid monthly and the balance therefore remains the same. This can be a good option for those looking to protect their assets and inheritance, while also releasing funds from their property.
Stonehaven provides a range of excellent products for post retirement borrowing. They also have a roll up equity release scheme in which the interest rate remains fixed for life, but interest is added to the balance as it builds up. This may not suit everyone, as the compounding effect of the interest does build up significantly over a period of time. But for those who have no dependents or no wishes to leave an inheritance the roll-up lifetime mortgage could be an alternative. These are all options for pensioners, but these options need to be considered very carefully, preferably with the help of an independent mortgage or equity release adviser.
The fact is that after Halifax withdrew their Halifax Retirement Home Plan mortgage in August 2011, there has been a huge deficit in the demand and supply of credit solutions for the elderly. There is a growing need for credit among the retired and elderly section of the population, but there is not enough choice available to cater to this need. The FSA has not assisted the retired generation in this aspect. By clamping down on interest only mortgages in general has also dissuaded them from lending to retirees and consequently there is now a void that needs filling with the right retirement mortgage plans.
The Halifax retirement mortgage was designed to cater to the market of financially savvy pensioners who want to optimise their asset without losing their estate, and it is sector of the market that is acutely underserved at the moment. This is a very big and important business opportunity for credit providers, whether it is equity release companies or high street mortgage lenders. Sooner or later this gulf between demand and supply is bound to be filled by companies that can see the potential in the opportunity.
Maybe this is where the next generation of equity release schemes can come into play. We are already seeing innovation via the likes of Stonehaven and Hodge Lifetime, but we need more willing to take the plunge in the quest to provide retirement mortgage finance for pensioners.