New data released by specialist lender Hodge shows a significant change in the behaviour of Retirement Interest Only (RIO) mortgage customers.
According to the data, which covers loan completions from January to July 2023, the proportion of RIO customers using their funds to financially support family members has halved, plummeting from 14% in 2022 to just 7% in 2023.
Meanwhile, the number of RIO customers using their loans for debt consolidation has seen a 4% increase this year.
Emma Graham (pictured), business development director for mortgages at Hodge, said: “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.”
Graham attributes the change in customer behaviour to the current socio-economic climate, suggesting that the shift is influenced by external pressures. The news comes on the heels of Hodge’s report earlier this summer which highlighted an almost 850% surge in RIO mortgage applications since the product first hit the UK market five years ago.
In the years since its launch, Hodge has adapted its RIO mortgage offerings to better suit its customers. The lender has increased its maximum loan size from £500,000 to £1.5 million and raised its maximum loan-to-value (LTV) from 60% to 75%. Additionally, Hodge has lowered the minimum age for RIO application from 55 to 50.
“There is certainly no ‘one size fits all’ when it comes to a later life customer,” Graham added. “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. 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.”
