Only 3,156 retirement interest-only mortgage (RIOM) sales took place in 2022, which is just over 10% of the Financial Conduct Authority’s (FCA) current annual target.

Although the number of sales were up by just under a quarter (23.4%) compared to 2021, rising from 2,558, RIOMs made up just 0.24% of mortgage products sold in 2022.

Since the launch of RIOMs in March 2018, the FCA forecast that around 21,000 sales would be approved annually from 2021/22. However, only 5,785 RIOMs were sold by the end of 2021, rising to 8,943 by the end of 2022, according to a freedom of information request from the FCA.

In its current form, Responsible Life believes that RIOMs will never become a mainstream financial tool for retired homeowners despite the huge demand for them.

According to the latest UK Finance data, there were still 754,000 pure interest-only mortgages outstanding at the end of 2021. RIOMs were designed to remove age as a barrier for remortgaging for borrowers who cannot repay their traditional interest-only mortgages when they hit retirement.

They were made possible by a relaxing of affordability tests by the FCA, and these changes meant that borrowers no longer needed to demonstrate that they had a long-term repayment plan. They just have to show that they can afford the monthly payments.

Executive chairman of Responsible Life, Steve Wilkie, said: “Hundreds of thousands of people face hitting retirement with conventional interest-only mortgages they cannot repay and RIOMs could be a useful product. But they must be capable of reaching a wider audience, and that rests on how easily applicants pass affordability tests.

“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 RIOM into a lifetime mortgage when it makes financial sense.”

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