Sixteen per cent of those who take out a Retirement Interest Only (RIO) mortgage on their property do so to provide a family gift, according to new research from Hodge.
The data revealed that the average RIO mortgage taken out in 2019 was £129,576, which is relatively close to the average mortgage debt of an FTB in the UK recorded in July of this year, of £138,999.
Hodge’s research listed the top reasons for borrowers choosing to take out a RIO mortgage on their property, revealing that 22% said they were paying off an existing mortgage, 20% were buying another property, and 18% saying they were consolidating debts.
Hodge was one of the first lenders to launch a RIO mortgage last year and has seen a steady increase in the amount of people taking out the new product – with more than £25m being lent to RIO customers since the launch.
Hodge managing director of mortgages, Matt Burton, commented: “This data is very revealing. We were surprised at the age of our RIO customers, when the FCA reclassified these products, they saw a need for a mortgage that those approaching retirement could use to release equity in their homes that wasn’t a traditional equity release mortgage.
“Yet it seems that those in their seventies are seeing the advantage of a RIO mortgage, which allows them to enjoy the equity in their home and manage the interest payments.
“Despite figures saying that the uptake on RIO mortgages has been slow, we have been encouraged by the amount of people using the product to achieve their goals – which again made for interesting reading – with an amazing 16% of our customers using their payment to give a family member a gift.
“The data also shows that our customers are using the RIO mortgage to their own advantage, with a fifth using the loan payment to buy another property, and 14% using the money for home improvements – which could be a sound investment.
“The introduction of the Hodge Fixed-for-Life RIO mortgage in September, the first of its kind on the market, has seen an increase in the amount of inquiries we are having around the RIO and we think this is only set to increase as those approaching retirement age seek to free up money from their homes with manageable interest payments.”
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