Added: 12 February 2019
Ipswich Building Society launches new Retirement Interest Only (RIO) mortgage products
In an extension to its existing later life product range launched in June last year, Ipswich Building Society has introduced three new retirement interest only (RIO) mortgage deals. The new loans are available to applicants aged 55 and over, offering a maximum LTV of 50%.
The launch follows the Financial Conduct Authority’s (FCA) revised approach to later life lending, which introduced the Retirement Interest Only (RIO) mortgage.
The Society offers no maximum age restriction at the end of the mortgage term and last year introduced a specialist product range. Later life borrowers have included those seeking to remortgage to gift funds to children or grandchildren, fund home improvements, purchase a home to retire in or fund lifestyle purchases such as a caravan or motorhome.
From 14 February the following interest only products will be available to customers across England and Wales through an exclusive panel of selected intermediaries:
- A 2 year discount rate at the Society’s Standard Variable Rate (currently 5.74%) minus 2.74%, giving a pay rate of 3.00% for two years from the completion date (5.6% APRC*).
- A 2 year fixed rate at 3.25%, fixed until 30 June 2021 (5.6% APRC*).
- A 3 year fixed rate at 3.35%, fixed until 30 June 2022 (5.5% APRC*).
All mortgages are available up to a maximum loan of £500,000 (minimum £25,000) and have an application fee of £199, a completion fee of £500 and a £35 CHAPS fee. A tiered valuation fee based on property value applies. For remortgage applicants, there is a free valuation (up to property value of £1m) and fee assisted legals. A minimum of £150,000 equity in the property is required.
The Society’s discounted rate product has no Early Repayment Charge (ERC) or penalties for overpayments. For fixed rate products, overpayments are fee-free up to 50% of the original loan amount. Overpayments in excess of 50% of the original loan amount, or early redemption, will be charged at 3%. For overpayments this charge is calculated on the overpayment amount that exceeds the 50% allowance, and for early redemption is calculated on the original loan amount.
The Society anticipates that the new RIO products may be attractive to individuals whose current interest only mortgage is approaching the end of its term and where their planned repayment vehicle has not performed as expected, resulting in a shortfall.
Commenting on the launch, Richard Norrington, Ipswich Building Society CEO, said: “This enhancement to our existing later life mortgage range will provide additional options for borrowers aged 55 and over seeking a mortgage. With no upper age limit and no specified term, RIO borrowers can remain in their home without the burden of worrying about repaying the capital until a significant life event such as a move into long-term care or death of the last remaining borrower, if a joint mortgage is held.
“However, RIO mortgages also serve other purposes such as allowing older borrowers who can afford the monthly interest payments to free up capital to pass on to children or grandchildren, without the need to downsize. Similarly, RIO mortgages can also be used for home extensions or property changes such as converting a house for downstairs living, which may allow an older borrower to remain independent in their own home for longer.
“We already have a significant number of older borrowers on our mortgage book and many of our savers also fall in to this category, so we very much understand their unique needs as a result of changing sources of income, lifestyle and health. We’re delighted to be extending our product range to further satisfy their needs.”
The Society’s RIO products will currently be available through selected intermediaries to ensure its customers receive appropriate advice from later life specialists.
In line with the FCA’s RIO guidelines applicants will not be required to have a repayment vehicle in place (although a minimum equity requirement will still apply). The loan will be repaid through the sale of the property at the occurrence of a specified life event, usually the customer’s death or move into long-term residential care.
There is no fixed term or maximum age restriction for applicants, although the APR calculation will be based on an estimated term length. It is recommended that all customers borrowing beyond 75 have registered a lasting power of attorney for property and financial affairs. All borrowers aged 75 and over at the start of the mortgage contract must first seek independent legal advice.