RIO mortgages are aimed at those in retirement who still making mortgage repayments. They work very much like a standard mortgage product in that borrowers make monthly interest payments, however, there is no set end date or term for the mortgage. Instead, payments continue until either the borrower dies or goes into long-term care, at which point the property is sold to repay the debt.
Commenting on the increase in competition within the RIO market, Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Historically, many older borrowers who had retired or were shortly due to do so, found it difficult to find a new mortgage deal. When the Financial Conduct Authority reclassified RIOs as mainstream mortgages rather than equity release products in early 2018, a lifeline was thrown to many who may have previously felt trapped or not catered for.
“According to recent research from Ipswich Building Society, 60% of borrowers over the age of 50 felt that there were fewer mortgage products available to them compared to younger mortgage applicants, and more than half believed that they had fewer mortgage providers to choose from.
“It should therefore be welcome news that, as Moneyfacts.co.uk data shows, the RIO mortgage market is continuing to grow. Over the past 12 months alone, not only has the number of providers active in this sector increased (standing at 18 today), but the number of products available has almost doubled to 74 – compared to 38 deals that were on offer in February last year. In addition, the average interest rate charged has also fallen to 3.47%, which is a positive step.
“Those looking to take advantage of a RIO mortgage deal should consider their next steps carefully. Lifetime mortgages and equity release products may also be available, and so seeking independent financial advice could be invaluable in ensuring you select the right product for your circumstances.”
