New mortgages help housing crisis

Later life lending specialist, Hodge Lifetime (Steve Cox), has been contributing to our latest interest-only mortgage discussions, alongside broker John Charcol and a property investment research academic from Nottingham Trent University (Dr Alla Koblyakova).

At our mortgage event in 2014, broadcaster and Money Box presenter Paul Lewis was joined by Daniel Read of Warwick Business School, senior directors from Lloyds Banking Group and LV= and mortgage commentator and technical expert Ray Boulger of John Charcol. The conversations centred on the challenges of communicating with borrowers to pay off mortgages where there was no exit strategy in place. The absence of such a strategy would mean difficult down-sizing or the loss of homes.

Since then the FCA has been consulting widely with the industry and this year changed its rules about age restrictions on interest only mortgages. The new lending approaches may allow people to stay in their homes up to the age of 95. Since 20,000 interest only mortgages are due to expire every year up to 2030, this has been an important step in creating a more secure housing market.

Steve Cox, Business Development Director at Hodge Lifetime, described how the FCA has been clear that lenders have to underwrite "perpetual affordability" so that borrowers can continue to cover the cost of a Retirement Interest Only Mortgage (RIO) right to the end of their lives - or at the point when they might go into care. Pensions, investment income and all other sources can contribute to paying the interest but these need to be consistent. Please watch Steve discussing this in the video above.