With the number of homeowners with a maturing interest-only mortgage predicted to peak during 2022, the latest research revealing that the number of providers offering retirement interest-only mortgages is at its highest level on record will come as welcome news.
The number of providers currently offering RIO mortgages now stands at 22, which is nearly double the number available two years ago, when there were just 12 providers offering these types of mortgages. Year-on-year, the number has increased by four, rising from 18 in February 2020.
Along with the growth in providers offering RIO deals, the number of products available has also risen year-on-year. In February 2019 there were just 38 RIO mortgage deals available, and this increased to 74 in February 2020 and rose to 109 available this month.
“While these changes seem small, these facts are notable for two reasons; firstly, RIO mortgages are a niche product with perhaps few borrowers for whom they are an appropriate option and make up only a small percentage of mortgage products overall, so any slight positive change impacts the sector,” explained Eleanor Williams, finance expert at Moneyfacts.co.uk. “Secondly, providers withdrew swathes of mainstream mortgage products last year and choice remains considerably below that seen prior to the onset of the pandemic. These positive shifts in both the number of lenders and RIO deals are therefore great news for older borrowers.”
Homeowners looking for a RIO mortgage deal should be aware, however, that the average rate on a RIO mortgage has also increased year-on-year. In February 2019, the average RIO mortgage rate stood at 3.50%, which fell to 3.47% in February 2020 but has risen since then to stand at 3.59% this month. Saying this, the average rate has fallen slightly since December 2020, when it stood at 3.60%, so this could be the start of a downward trend in rates.
“Overall, it is inherently positive that those considering a RIO mortgage now have not only a greater choice of products, but also from a greater choice of lenders,” added Williams. However, borrowers considering a RIO mortgage should secure qualified, independent advice to ensure they are picking the right type of product for their circumstances. Equity release, down-sizing and other options may be valid alternatives, so having the knowledge and support of a professional in making their choice would be vital.”
Homeowners with a maturing interest-only mortgage should read our story on how to pay off an interest-only mortgage for more information. Alternatively, visit our RIO mortgage and equity release pages for more information about these products.