The number of retirement-interest only (Rio) mortgages sold doubled on an annual basis in the third quarter of 2021, Responsible Life says.

According to data gleaned from the Financial Conduct Authority (FCA), in Q3 2020, 386 of the product type were sold, which compares to 761 in Q3 2021 – a 97.2% increase.

Responsible Life points out, however, that within Q3 2021, Rios made up only 0.22% of the 341,227 mortgages sold, “only a marginal improvement on the 0.11%” in Q3 2020.

The broker says the unpopularity of Rios may be down to the “rigid” affordability tests, which include the sole survivor rule, which states that joint borrowers must each show they can afford the monthly payments on their own should their partner die.

It wants to see lifetime mortgages being regarded as a permitted repayment plan for Rios and the sale of the property being an accepted long-term repayment plan.

This, Responsible Life believes, would help Rios achieve their promise – best exemplified by the FCA, in 2018 when Rios launched, predicting the sale of 21,000 of the product type by the end of 2021.

By the end of September 2021, the FCA says that 5,029 had been sold in total.

Responsible Life executive chairman Steve Wilkie says: “It still has to be said that progress has been poor and Rios still aren’t making a dent in the problem.

“Hundreds of thousands of people face hitting retirement with conventional interest-only mortgages they cannot repay and Rios could be a tremendously useful product. But they must be capable of reaching a wider audience, and that all comes down to how easily applicants pass affordability tests.

“This is something this product was specifically designed to assist with, so perhaps it’s time policymakers looked again at the way they’re structured to avoid creating new mortgage prisoners.

“The situation could worsen this year, exacerbated by the cost of living crisis. Borrowers applying for Rios need to be able to demonstrate they can afford the monthly payment so a squeeze on household budgets could result in even fewer consumers being able to access them.

“The sole survivor rule is one key area that could be overhauled, because it means that each individual borrower must show they can afford the monthly payments on their own.

“An easy way around this rule would be to allow borrowers to plan for the sale of their home as a repayment vehicle or convert their Rio into a lifetime mortgage when it makes financial sense.”