The big banks in the UK are being increasingly put under pressure by various stakeholders and retirement experts to offer older interest only borrowers a lifeline. The issue arises as currently those borrowers who are only paying the interest on their mortgages may be forced out of their home unless they are able to stump up thousands of pounds when their term expires.
There is one small bank that does offer a solution and customers are able to borrow up to 50% of their property's value for another 15 years or until they reach the age of 85, whichever is first. There are also no penalties for repaying early which means should the borrower decide to downsize, for example, they can clear the entire debt at any time without charge. Former pensions minister Baroness Altmann, now an outspoken advocate for the rights of the retired has welcomed the new mortgage deal, saying:
"It's terrible that people can be kicked out onto the streets because they are considered too old to borrow. It's great that at last a company is willing to offer these people an option. It could mean thousands of people get to stay in their homes."
Unfortunately, it is not all good news. The new deal is expensive, with the company in question charging 6% on a five-year fixed deal. Compared to Santander which currently charges just 1.89%, it's clear that it's a costly mortgage to take out.
However, it does give older borrowers an option and this at a time when the Financial Conduct Authority predicts that about 50% of the 2.6 million interest only borrowers will struggle to clear their debts, their research indicating that borrowers who do fail will do so by an average of £71,850. Unfortunately, the larger lenders are doing very little to address the situation, although Nationwide has indicated that they are working on a retirement loan, but to date they have not made it clear when this may be available to the public.