Money: Retired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all - PressFrom - United Kingdom
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MoneyRetired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all

06:20  14 august  2019
06:20  14 august  2019 Source:   thisismoney.co.uk

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Nationwide has become the first major lender to launch a retirement interest - only mortgage ' Retirement interest - only mortgages have been slowly growing in number as more lenders have The majority of retirement interest - only deals are offered by smaller building societies and some

An interest - only mortgage is a niche product that can be difficult to find these days. NerdWallet's selection of mortgage lenders for inclusion here was made based on our evaluation of the products and services that lenders offer to consumers who are actively shopping for the best mortgage .

Retired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all estate agent sign document approve agreement for buy new home

Britain's biggest building society has rolled out a mortgage deal which could offer a lifeline to thousands of older borrowers stuck on interest-only home loans.

The retirement interest-only mortgage is like a standard interest-only remortgage but it can be taken after the borrower retires and paid back once the home is sold, the homeowner dies or goes into full-time care.

Borrowers can use them to clear existing debts or borrow against their home to help boost their retirement income.

Retired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all © Provided by Associated Newspapers Limited Nationwide becomes the first high street lender to offer retirement interest-only mortgages

In April, Nationwide became the first major mortgage provider to launch these mortgages, running a pilot with its existing customers. Now it has made the deals available to everyone, prompting experts to hope that the specialist home loans will finally start to gain traction with customers.

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Retirement Interest Only (RIO) mortgages are becoming more common and available from a wider selection You can remortgage from an interest - only mortgage to an ROI product, using the sale of the For instance, Aldermore Bank, the first lender to enter the market, launched a three-year fixed

Interest - only mortgages , where borrowers don't pay off the capital until the end of the mortgage term, were popular during the boom years. Stuart Gregory of broker Lentune Mortgage Consultancy said he was surprised Nationwide had been the first major lender to pull out of this market.

Last year the financial watchdog changed its rules to allow thousands of retired borrowers to remortgage onto interest-only deals without needing a repayment plan in place.

Instead, they are allowed to use the sale of their home on death or moving out into full-time care to repay the balance.

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Known as retirement interest-only mortgages, these deals are aimed at homeowners who have failed to clear their debt before retirement and those who would like to cash in on their home's value to help fund their pension years.

While currently a niche product, their popularity is expected to grow substantially in years to come – but up to now they have only been offered by smaller building societies and specialist lenders.

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When someone with a maturing interest - only mortgage is unable to repay the capital but doesn’t want to sell their home, their lender will The good news is that there are a growing number of specialist products aimed at older people, including those coming to the end of an interest - only mortgage deal .

Nationwide slashes LTV on its interest - only deals , raising fears it will leave thousands of borrowers as ' mortgage prisoners'.

What is Nationwide offering?

Nationwide is offering a two-year fix at 2.99 per cent, a five-year fixed rate at 3.19 per cent, a 10-year fixed rate at 3.79 per cent and a two-year tracker at 2.74 per cent. All deals are at 50 per cent loan-to-value and come fee-free.

Applicants must be aged 55 or over - both applicants if it's a joint mortgage - and can apply up to age 85. Existing Nationwide mortgage members have special access to borrowing options up to the age of 95.

There are no product, valuation or advice fees, and an applicant's reason for borrowing can include home maintenance and improvements, gifting to family members, going on holiday or debt consolidation.

Applicants must also be receiving a fixed pension income to qualify.

Eligible incomes include occupational pension income, annuities, state pension, pension credits or war disablement pensions.

Retired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all © Provided by Associated Newspapers Limited Though Nationwide launched the deal in April, from today non-members can also apply

Nationwide's Jason Hurwood said: 'This move is in direct response to growing demand for choices in later life, which is why we are now extending to both members and non-members.

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An interest - only mortgage offers a lower monthly payment and is best suited for people with But interest - only mortgages are not usually suitable for first -time, or typical, long-term home buyers. Your new score: Looking for the best lender ? We've researched the top lenders to help you find the

Some lenders offer only fixed-rate mortgages while others offer adjustable-rate mortgages as well. Payments are significantly lower on an interest - only mortgage during the initial phase of the loan and significantly higher during the final period.

'We are now the first major high street lender to support that growing demand with a variety of borrowing options to access the value locked up in their homes.'

Nationwide also offers a range of lifetime mortgages to new and existing customers.

How does it compare to what's already out there?

There are a few retirement interest-only deals on the market, but many are from smaller lenders and some are restricted on a postcode basis, meaning not everyone can apply.

Around 20 lenders now offer the deals, but Nationwide's are currently among the cheapest.

Leeds Building Society, the second-largest lender to offer this type of deal, has a  two-year fixed rate deal available up to 55 per cent loan-to-value, but at 3.34 per cent and with a £999 product fee it's considerably more expensive than Nationwide's offering.

Retired and want an interest-only mortgage? Nationwide becomes first major lender to offer deals to all © 2017 Chris Jongkind A row of houses on a curved street in suburbia.

Marsden Building Society offers a slightly cheaper two-year fix at 2.79 per cent at 50 per cent loan-to-value, but this deal does comes with a £998 fee. Nevertheless along with Nationwide this is among the cheaper options out there.

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Interest - only mortgages are only suitable for borrowers who have substantial savings or investments which they could use to pay back the loans when they fall due. If you have an interest - only mortgage it's important to act as soon as possible and not to bury your head in the sand.

As major lenders pull out, the FCA fears it may become impossible for ordinary people to get one .

Meanwhile, specialist lender Hodge Lifetime offers a retirement interest-only deal up to 60 per cent loan-to-value, but the rate at 3.20 per cent for a two-year fix with a £995 fee is quite expensive. You must also hold at least £100,000 equity in your home to qualify for this deal.

On a £100,000 mortgage, Nationwide’s two-year fixed rate deal would result in monthly repayments of £249.17, Marsden’s £232.50, Leeds's £278.33 and Hodge Lifetime's £266.67.

Rachel Springall of finance experts Moneyfacts said: 'The products on offer through Nationwide have been carefully priced to sit comfortably in the market and with such a prominent brand backing these type of deals, hopefully this will inspire other well-known brands to consider competing in this market.'

Have retirement interest-only mortgages flopped?

This is Money recently revealed that as of April 2019, just 353 retirement interest-only deals had been completed across the whole of the UK.

In March, we reported that just 112 retirement interest-only mortgages were successfully completed across the whole of the UK last year.

Official figures obtained from the Financial Conduct Authority via a Freedom of Information Act request then revealed that the number of retirement interest-only mortgages taken in the first three months of 2019 was higher than in 2018, but barely.

The tiny completion numbers come despite official estimates suggesting there are tens of thousands of pensioners with no plan for how to repay their existing interest-only mortgages.

These numbers were recorded by the Financial Conduct Authority before Nationwide launched its own product.

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