According to the latest research, advisors are demanding that lenders provide more solutions for customers struggling with interest-only mortgages.
A survey of 96 advisers, commissioned by Bower Retirement Services in September, indicates that nearly one in three (30%) wanted product development to focus on interest only – the same number who believe equity release rate cuts will drive demand.
According to the research, advisers are getting more inquiries from clients who are looking for help with interest-only issues.
15% of those advisers surveyed say the rise in this type of inquiry has been substantial over the past year.
Respondents further estimated that an average of 25% of their over-55 clients have outstanding interest-only mortgages compared to an average of 30% of clients who have outstanding mortgages.
Data from the Council of Mortgage Lenders revealed recently that the number of interest-only loans now stands at 2.36 million, having dropped by a quarter in the past two years, with 1.9 million pure interest-only and 446,000 ‘part and part’.
Last year around 112,000 loans were paid off and another 335,000 were switched to repayment. However, two-fifths of those switched from interest-only would not have been due for payment until 2028.
Andrea Rozario, chief corporate officer, Bower Retirement Services, said:
“The drop in the number of outstanding interest-only loans shows the success of efforts to ensure people who are at risk are aware of the problem and are taking action.
“However advisers are seeing increased inquiries from over-55s customers looking for help on dealing with interest-only issues and are realising they need to offer a range of solutions which includes equity release plans.
“Equity release plans which enable customers to pay interest are a logical solution for many and underline the need for continuing innovation in the industry as the demand is undeniable there.”
The Bower research also found strong interest in downsizing.
Advisers say on average 25% of clients have asked about downsizing in the past year.
Bernie Hickman, managing director, Legal & General Individual Retirement, commented:
“The equity release market has a great opportunity to respond to the needs of older borrowers who still have mortgages. With around 30% of lifetime mortgage customers also having a mortgage outstanding, many borrowers who find themselves in this position can turn to equity release to allow them to stay in their home into retirement. The market needs to have the products in place to help people do this, and this is a good example of where market dynamics are likely to drive increased product innovation to meet consumer demand. This market is not currently well served by the mainstream mortgage market and it is an area we are interested to explore.”
30th October 2015