The Financial Conduct Authority is currently overseeing a consultation that could see the re-emergence of contentious "interest-only" mortgages that in case may run through to the holder’s death.
Whilst lenders are currently forbidden from allowing borrowers without a clear means to repay capital there is a fear that this could be forcing consumers into either selling the property or locking into ‘equity release deals’.
This marks the latest move to increase competition in the mortgage market, with the return of the ‘interest only’ mortgage that The FCA expects to be a cheaper option for elderly borrowers without the finance to clear capital on their properties, meaning better rates and more choice for pensioners.
Our very own Ray Boulger, Senior Technical Manager at John Charcol told the Telegraph "It will widen the choice for consumers quite considerably because there are some lenders who would like to offer this product at the moment but don't feel they can".
With the limited options currently on the table for elderly borrowers it’s clear how this move could bring an end to pensioners being locked out from the best rates with the FCA seemingly agreeing that regulation is not necessarily beneficial to all consumers. As the consultation reads "Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages.
"In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest. Consumers are also more likely to be familiar with the product features of a mortgage involving interest payments."
The changes also would mean a relaxation in the rules concerning the ability of borrowers to downsize to clear their mortgage, allowing for the sale of the property upon death to be an satisfactory means of repayment.