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This is the latest announcement from Buckinghamshire BS.
Announcement
Providing greater stability on retirement interest-only mortgages
The increasing need for people to take mortgages into retirement, or to unlock cash from their properties, has meant that some form of later life lending is becoming a more familiar part of the homeowning journey.
As it often does, the market is responding by offering a wider range of products designed to meet the increasingly varied needs and financial circumstances of customers.
Whether someone is remortgaging because they haven’t been able to clear their home loan before retiring, or is seeking to unlock capital to support retirement income, pay off debts, help family members, renovate, or fund a lifestyle activity, there’s now a variety of options for them to consider.
While we’re seeing an increase in later life lending overall at Buckinghamshire Building Society – with a doubling in volumes between May and June alone – demand for retirement interest-only (RIO) mortgages specifically has been rising steadily over the last 12 to 18 months.
RIOs were introduced as a more affordable solution for older borrowers who want the security of a lifetime mortgage, but where the loan amount does not increase in size. Because there’s a monthly interest payment to make, it suits those with a regular fixed income.
Latest UK Finance figures show an increase in the number of retirement interest-only mortgages advanced at the start of this year, with a value of £28m, which is up 16.7% compared to the same quarter in 2023.
Supporting that trend, Advice Wise also reported a 163% increase in the number of searches for RIO products in the first quarter of 2024. This was part of a 139% increase in the overall number of searches on the platform for later life lending between December 2023 and early this year.
Keeping the market moving while protecting the financial security of homeowners is not just about providing a wider range of products though, it’s also about constantly reviewing and evolving existing products to make sure the conditions and criteria are right.
This means listening to feedback from intermediaries as to what’s working, what isn’t and where the gaps are.
And brokers have been telling us that while RIOs are a popular choice, borrowers now want more stability within that. In today’s changeable rate environment, there’s a clear preference for more structured repayment methods, particularly among later life applicants who are on a fixed monthly income.
They are seeking the security of stable, predictable payments, but finding a scarcity of fixed rate options in the retirement interest-only range.
We’ve had numerous requests from advisers for a fixed rate RIO option and have therefore introduced a new five-year fix for those aged 55 and over. It’s available up to 60% loan-to-value for both purchase and remortgage purposes. There’s also a desktop valuation option for remortgage applications.
As always with applications to Buckinghamshire Building Society, cases are assessed on an individual basis and manually underwritten.
By responding to the demand with a five-year fixed rate RIO, we aim to provide more financial stability and peace of mind for borrowers navigating the current challenges of the retirement years.
We always encourage advisers to let us know what their customers need and will respond with new products or product changes where possible – this is how we can work together effectively to keep the market moving, and in the best interests of the borrower.
Claire Askham is Head of Mortgage Sales at Buckinghamshire Building Society