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Retirement Advantage responds to FCA consultation on retirement interest-only mortgage plans

Retirement Advantage has responded to a consultation paper from the Financial Conduct Authority, which sets out plans to redefine retirement interest-only mortgages, currently a type of Lifetime mortgage.

Alice Watson, Head of Marketing at Retirement Advantage Equity Release, commented:

“It is great that these proposals could lead to a wider range of options available to older borrowers, but retirement interest-only mortgages are not the only option. Retirees should ensure they are considering the full range of solutions available to them.

“Lifetime mortgages are a viable and a flexible option, and provide a number of safeguards that the proposed retirement interest-only mortgages may not offer. Lifetime mortgage customers can choose an interest only option, where they repay just the interest on their equity release mortgage. One difference between this and the proposed retirement interest-only mortgage is that, if customers miss their monthly interest payments, they can switch to interest roll up without threat of repossession, so long as they abide by the terms and conditions, which offers customers real peace of mind.

“The proposed retirement interest-only mortgage may also be offered without the client needing to take financial advice. We believe this carries its own risks and could potentially leave the customer worse off. With lifetime mortgages, customers have the safeguards of financial advice, which means that a holistic overview to their retirement planning has been taken and the most appropriate solution has been recommended. Without seeking professional financial advice, there is a risk that customers may not be aware of which products are best for their particular circumstances.“