How Popular are Interest Only Mortgages in Retirement Set to Become?September 25th, 2013
Interest only lifetime mortgages have proved to be increasingly popular since they were first introduced into the equity release market. There are several factors that have contributed to their continued success, and by the look of things, interest only mortgages during retirement will see increased demand in the future.
There have been marked changes in the attitude towards retirement in recent times. Today, people are interested in remaining active during their retirement years and optimising this golden period of life. The enhanced lifestyle spawned by this change in attitude requires a certain level of funds during retirement.
Along with a change in attitude that involves more spending, general costs of living have also gone up. The cost of care is also rising steadily, and more and more people are having to pay for their own care during old age. All these factors have contributed to the growing need for additional funds to support people’s lifestyle post retirement.
At the same time, perceptions about borrowing also seem to be changing. Having an unpaid mortgage during retirement was once frowned upon and considered an embarrassment. Today, people are becoming more open to the idea of lifetime mortgages that allow them to optimise their financial assets and which can be funded using good retirement income.
There has been a marked lack of residential mortgages for people already in retirement or about to retire, and interest only lifetime mortgages have filled this niche. The recently withdrawn and very popular Halifax Retirement Home Plan was the only interest only lifetime mortgage option in the market for a time, and its withdrawal created a huge void in the retirement finance market. More and more lenders are beginning to sense the need for similar products and are entering the market.
With leading equity release brokers like Equity Release Supermarket receiving queries from new lenders about the interest only lifetime mortgage market, the growing interest in this sector both from lenders and clients certainly seems to be palpable. Existing providers are introducing more flexible and innovative terms into their interest only mortgages, and new lenders are also set to enter the fray.
It is evident that there is a growing demand for financial lending solutions in the retirement sector, but it is also evident that people are concerned about equity release products eating away all the value of their property and leaving beneficiaries with nothing. This is the reason why some people are turning away from roll up equity release schemes, which have compounding interest and could potentially result in a disproportionately large debt.