Standard Life Home Finance is one such lender which, in January, launched its Interest Reward product that enables customers to reduce their interest rate by up to 0.45 percentage points if they commit to set monthly interest payments over an agreed term.
Regulation, again, was a factor in the product’s development.
“One way in which the sector can achieve good outcomes for customers is by evolving with consumer demand and providing a diversified range of products to suit individual needs,” says Kay Westgarth, sales director at Standard Life Home Finance.
“Our new Horizon Interest Reward product, for example, has been developed with consumer duty in mind.”
Standard Life: how much lifetime mortgage borrowers can save
Percentage of monthly interest borrower commits to paying | Interest rate discount determined by the length of time borrower commits to making monthly interest payments | ||
5 years | 10 years | 15 years | |
50% | 0.05% | 0.10% | 0.15% |
75% | 0.10% | 0.20% | 0.30% |
100% | 0.15% | 0.30% | 0.45% |
Source: Standard Life | |||
Mandatory payments are one way for lifetime mortgage borrowers to service interest, and Bibby at Key Advice says he is seeing an increase in customers willing to service interest in some way.
“We see this particularly appealing to customers between the ages of 50 and their early 60s who will be taking their mortgage borrowing well into retirement, and whose needs may not be being served currently by the mainstream mortgage sector.
“For new products like payment term lifetime mortgages to be successful, it will require advisers to also evolve their approach and have comprehensive conversations with customers across all borrowing options.
"This is something that both the specialist equity release advisers and the mainstream mortgage advisers need to quickly address.”
Chloe Cheung is a senior features writer at FT Adviser
