Lender's latest figures show a change in customer behaviour
The number of retirement interest-only (RIO) mortgage customers spending their loan funds to give financial gifts to family members has been cut in half so far this year, data from Hodge Bank has shown.
The lender’s completion data for January to July 2023 indicates a drop in the proportion of RIO customers using funds raised to support family members from 14% in 2022 to just 7%.
Meanwhile, customers using the mortgage for debt consolidation has increased over the same period, with a rise of 4% in the number of RIO customers using the capital for these purposes.
“It’s really important for us to understand what matters to our customers, so we can continue to develop our propositions to support them in the moments that matter,” said Emma Graham (pictured), business development director for mortgages at Hodge. “These latest figures show a change in customer behaviour, impacted by current socio-economic pressures.”
Hodge has earlier revealed that it had seen a near 850% increase in the number of applications received since it became the first UK provider to reach the UK market with its RIO product five years ago. Since then, it has also trebled its maximum loan size from £500,000 to £1.5 million, increased its maximum LTV to 75%, and lowered the age at application from 55 down to age 50 to meet the needs of a larger audience.
“There is certainly no ‘one size fits all’ when it comes to a later life customer, with some using the product to plan for their retirement, and others looking to refinance an existing interest-only mortgage or to plan for inheritance purposes,” Graham added.
“RIOs may be niche, but they remain pivotal in providing a solution for a growing number of your more mature borrowers in today’s market. From what we’ve seen by staying close to customer stories, we certainly think this is the case.”
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