Canada Life has reported that its interest-serviced lifetime mortgages are typically three years younger than those who opt for its traditional products where interest is rolled up.
The lender launched its Advantage lifetime mortgage in February with a discounted interest rate for borrowers who make regular monthly interest payments.
Customers can choose to pay 25%, 50%, 75% or 100% of the monthly interest, with discounts increasing when borrowers cover a greater percentage of the interest.
Canada Life’s analysis of the first six months of lending found the average Advantage customer was 66, compared with 69 for customers taking its Capital Select lifetime mortgage.
It reports that 86% of Advantage customers chose to service 100% of their monthly interest, while just 1% took the 25% option.
The average loan-to-value was 24%.
Joint applications accounted for 51% of Advantage borrowing, compared with 39% among Capital Select customers.
Repaying an existing mortgage was the most common reason for borrowing, cited by 48% of Advantage customers, compared with 27% of Capital Select customers.
Debt consolidation was cited by 31% of Advantage customers, compared with 22% of Capital Select customers.
Advantage borrowers were less likely to use the money for day-to-day living costs or holidays.
Only 9% planned to use the loan for day-to-day spending, compared with 27% of Capital Select customers.
Canada Life head of home finance Alice Watson says: “We can see from the first six months of Advantage data that interest-serviced lifetime mortgage products are attracting younger, low loan-to-value borrowers with strong payment discipline.
“For some, the certainty of regular interest payments and a lower rate will be the right choice. For others, the flexibility offered by a traditional roll-up lifetime mortgage with ad-hoc repayment options will remain a better fit.
“As customer needs evolve, continued product innovation is critical for the lifetime mortgage market to develop and support a wider range of retirees.”
