Lenders are finally waking up to the fact that there are a growing number of older borrowers who need a mortgage well beyond their fifties. Shawbrook Bank is the latest lender to address this market, launching a 55 Plus Interest Only product for borrowers nearing the end of the mortgage term with an outstanding balance. Variable rates are available from 5.25 per cent from five years up to 15 years, while fixed rates are available over three or five years at 5.5 per cent.
There will always be someone who needs this sort of product and increasingly so as people work and live longer. It shows that banks realise that they need to be more innovative with products for older borrowers. There is a gap in product provision for those who have passed 60 but aren’t yet old enough for a significant equity release loan.
The pricing is not the cheapest so it is worth considering what else is on the market for older borrowers. If you have unquestionable long-term ability to service and repay the loan (rental income/trust income/investment income/royalty income/pension income) then Metro Bank does not have a maximum age that the mortgage needs to be paid back by. Other good options are Family Building Society, which lends up to age 90 and has a flexible interest-only policy (sale of property/downsizing). The issue does come, however, when borrowers try to use their earned income in the calculations as underwriters won`t accept that people working at say 70, will be doing the same thing at age 90. Santander will lend up until age 75 on earned income alone. However, the deal has to fit on affordability on a repayment basis over the term so this can be good for borrowers in their 50s but perhaps not beyond.
There has also been a significant improvement in the equity release markets that will benefit this next generation as they advance in years and at pricing not dissimilar to that being offered by Shawbrook.