Reflecting on RIO
As RIO turns three, Emma Graham, business development director at Hodge reflects on the continued demand for retirement interest only (RIO), what’s changed and how it’s helping customers achieve their goals. She also considers feedback we’ve received from advisers on why they recommended our RIO product and what makes us stand out in an increasingly crowded market place.
Demand for interest only borrowing in retirement
Emma says; “A little over three years ago, we embraced the opportunity to be one of the first lenders to launch this kind of retirement interest only borrowing. Both our product and our approach to lending has evolved with customer need during this time, but one thing that hasn’t changed is the continued and increasing demand for this type of mortgage, RIO remains a vital part of our offering alongside our ever popular 50+ Mortgage.”
We’ve seen more high street lenders entering the RIO market over the years, and even with the trials and tribulations of the past 15 months, growth in this sector hasn’t stalled.
Over 50s borrowers and those approaching retirement don’t always want to go straight to equity release, they’re often looking for flexibility through interest only, capital & interest or part and part options with the ability to make monthly payments, and this is where RIO comes into its own and bridges the gap.
James Enos, National Account Manager for Hodge adds “we continue to see year-on-year increase in interest only mortgage maturities and a percentage of those are without a repayment vehicle or strategy, this coupled with greater awareness of the solutions available means we can expect continued growth in the RIO space over the next 6 months and beyond”
The Pandemic has changed why people borrow
Over the last year we’ve seen some clear changes in what people are using their mortgage proceeds for. As people spend more time at home, it makes sense that they are looking at ways to improve their surroundings and create comfortable environments to spend the moments that matter. Equally, a lot of people who are now considering working from home longer-term are looking to invest in a good home office space. We’ve seen a 50% increase in the number of people looking to use their mortgage funds for home improvements compared with the same period in the previous year.
The increase in the number of people wanting to gift funds to family has also seen a significant rise, which seems to be a result of the pandemic - maybe absence and the lack of seeing our family, makes the heart more generous as well as fonder?
80% more people who applied for a RIO in 2021 stated that it was for a family gift. RIOs continue to be a popular product choice, with many seeing it as the perfect stepping-stone to enjoying later life.
It’s so encouraging for us to see that the RIO is doing what it is designed for, providing options. It allows customers the benefit of using the value in their property to fund further home improvements, as well as financially helping their loved ones.
Flexibility - our Early Repayment Promise for example, a feature that allows our customers to sell up, repay and move out of the home without early repayment charges has become even more vital now peoples situations can change so rapidly.
Matthew Standish, Director at Lifetime Group said “Hodges early Repayment Promise has become an invaluable consideration in today’s market, it means my clients have peace of mind that were their circumstances to change they have the ability to sell and repay without incurring charges – people can become vulnerable for so many reasons and knowing this promise is available on all Hodge mortgages gives added peace of mind.”
The way we underwrite - every application is reviewed by an underwriter, this means there’s always someone here, working with you to help achieve the very best outcome for your clients. We will do everything we can to help, be that considering six times income on a like for like remortgage, looking at both pre and post retirement, employed and self-employed income potentially up to aged 80 or even being able to say yes to only one client needing to be 50 with the other younger.
Tracy Thompson, Mortgage & Protection Adviser at Firmitas Financial Services Ltd said “I have found that Hodge are often able to lend my clients more as your income multiples are more favourable than some other lenders. The rates tend to be fairly competitive.”
“Also the service and being able to talk to Brad or Sarah Desmond telephone BDM is so useful and I find this a huge plus point when using Hodge.”
We like a case with a story, and if you’re not sure your case fits we have a team of expert BDMs on hand who will talk things through with you, all you need to do is get in touch.
Expertise – we’ve been in this market since 1965 so we understand you and your client as well as the later life sector, Scott Bradley IFA at Beneficial Financial Management stated “I have been placing Retirement Interest Only Business with Hodge since launch and their service and understanding of the market is second to none.”
Peter Guntrip, Partner at Niche Financial Solutions added “Hodge have a refreshing approach to later life lending, are easy to deal with and employ professional staff who look to write business as opposed to looking to decline applications.”
Emma’s final thought's, whilst not for everyone, RIO continues to be a flexible and useful option for the right customer, in the right circumstances. As a colleague of mine once said, and I mirror the sentiment, it’s far better to have many different mortgage options in later life, than not having them available as an option at all.
Got a case with a story? Want to talk it through? Contact one of our Hodge BDMs today, you can find yours here, simply add your postcode and you’ll be given details of your very own Hodge experts.