Way back in 2018, the FCA predicted that 21,000 Retirement Interest-Only (RIO) mortgages would complete before 2021, as at December 2020, only 2,911 had done so. This proves a slow uptake against expectation, but does that really mean RIO has not been a success?

In 2018 the FCA reclassified RIO mortgages to be mainstream mortgages, opening them up to banks and building societies to consider. As a result, several building societies were quick to enter the market, due to their niche models of lending allowing for flexibility in this area.

Recent research by Moneyfacts highlights the fact that lenders still consider this to be growth area, with a number of new lender entrants coming to the RIO market over the past 12 months offering a total of 109 products to borrowers (as of February 2021).

While the overall completion volumes for RIO have proven to be a little optimistic, the product should not be dismissed out of hand.

Instead we should remember that RIO mortgages are a niche area of lending, they are not for everyone but they do provide a solution for a growing number of borrowers and form part of a wider package of borrowing solutions, now available to meet the needs of older borrowers.

RIO may not have reached the heady heights predicted at launch but it has still supported almost 3,000 borrowers with a lending solution, which otherwise would not have been available to them.

The low figures can be attributed to a number of reasons, from confidence in advising on this new way of lending, to understanding affordability (as affordability must be satisfied in sole name and the mortgage becoming repayable when a major life event occurs) and innovation in the competing later life market.

However, there is still a place for RIO mortgages in the market today. But rather than us viewing RIO as the answer to all our later life lending problems, it’s should be viewed as one of many solutions in an adviser’s later life lending armoury.

As the market evolves and grows, we’ll continue to see an increasing number of lending solutions coming from the later life market.

It is imperative advisers are educated in the options available to provide good, regulated advice.

Understanding the different solutions and being able to advise the most suited path for borrowers is important to success in the market.

Lenders also have a part to play in this, through sharing their knowledge with advisers and ensuring they do not overcomplicate their offerings.

At the Tipton we’re proud to offer lending solutions to members at all stages of their life. To find out more, call us on 0121 521 4000 or email us at [email protected].

Richard Groom is head of mortgage sales at Tipton and Coseley Building Society