"Making some mandatory repayments in pre-retirement is a sensible thing to do for many borrowers as this can significantly reduce the cost of borrowing"
- Will Hale, CEO at Key
Key Later Life Finance has added a new payment term lifetime mortgage into its product range, offering higher LTVs and increased flexibility.
The payment term lifetime mortgage is a new type of equity release enabling older homeowners to release more tax-free cash at a lower rate of interest than would otherwise be possible with a standard lifetime mortgage.
Key’s launch is aimed at homeowners who may be struggling to meet increased monthly mortgage repayments as fixed rate deals end and is also designed to help homeowners at the ‘younger’ end of the later life borrowing spectrum.
For those homeowners who may have already looked into equity release and found it hard to release the money they need to repay their existing residential mortgage, this new solution provides an additional cash boost that can them help pay off their existing borrowing.
Borrowers have to commit to a period of mandatory payments which last until the oldest applicant’s 66th birthday but payments only have to be a partial monthly interest payment, making the monthly cost more affordable than a standard residential mortgage or a retirement interest-only mortgage.
The new product can provide an LTV boost of up to 8% - worth more than £23,000 on an average property – and is initially designed to support 'younger' later life homeowners who may be in a transitional period between ending full time work and full retirement.
Research from Key shows half of 55 to 64-year-olds with outstanding mortgages have six or more years left on their loan and around 15% have more than six years left. Additionally, UK Finance data shows that over 50% of new mortgage borrowing extends beyond the borrowers 65th year as consumers increasingly extend their mortgage terms into later life.
Will Hale, CEO at Key, said: “The new payment term lifetime mortgage addresses a growing group of older borrowers who are struggling with their monthly mortgage payments.
“All advisers, both mainstream mortgage advisers and equity release specialists, must broaden their offering and consider all options for customers over 50 looking to borrow into retirement.
“The new product gives customers access to more of their home's value while ensuring they remain protected throughout later life, even if their circumstances change. Making some mandatory repayments in pre-retirement is a sensible thing to do for many borrowers as this can significantly reduce the cost of borrowing and can provide greater financial flexibility in the future.
“We are confident our revised approach to advice covers a holistic range of product types for customers, so they can feel confident in our advice recommendations. We are focused on leading the way in advice for the new later life lending market. We will continue evolving our approach on products and advice to keep pace with changing needs, a growing market, and the heightened expectations of Consumer Duty.”
