Mortgage rates: Will new retirement mortgages see a surge in older buyers?

While many home owners hope to be able to pay off their mortgage as soon as possible, it can be seen as a milestone and impossible to eliminate. 

But there are plenty of people who have retired and yet to pay off their mortgage. 

While retirement mortgages have been around for some time, Vernon Building Society has launched two multi-use retirement mortgages with no age restrictions or arrangement fees. 

The deals are available on both a repayment and interest-only basis. 

The initial rates are 1.25 per cent below its standard variable rate of 4.7 per cent (currently 3.45 per cent) with a Lasting Power of Attorney (LPA), or 0.50 per cent below the SVR (4.2 per cent at present) without an LPA for the first five years. 

Tom Gurrie, intermediary sales manager at the Vernon, told Your Mortgage the products can be repaid through property sale when the borrower dies or moves into alternative accommodation such as long-term care. 

He said: “These products provide an alternative to a more traditional equity-release mortgage, with no roll-up of interest and no increase in the mortgage debt. 

“We are seeing more applicants coming to the end of an interest-only mortgage in their later years who have no means to repay the outstanding debt demanded by their lender and therefore need to re-schedule their loan. 

“At the moment, the products are only available to brokers with an equity-release qualification, so we welcome the recent announcement by the FCA to review the rules on advice when discussing retirement interest-only mortgages”. 

Tom added that an LPA is becoming increasingly used to allow money issues, bank accounts etc. to be easily dealt with by a trusted family member where a person become infirm or loses mental capacity.