Will the introduction of a Retirement Interest Only (RIO) mortgage prove to be a carnival samba for the lifetime mortgage sector or the last waltz?

Retail Financial Services

John Hall

AdviceAdvisorsBank and Brand Distribution of Retail Financial ServicesFlexibilityInterestmortgageRetail Financial ServicesRetirement

We are all living longer (hurrah!) but a lot of us have to work longer (boo!) and this will only increase in the future...


  • Retirement Interest Only mortgages (RIOs) only offered by a few lenders
  • This is despite there being a 25% year on year growth of lifetime mortgages due mainly to low fixed interest rates, flexibility and no negative equity guarantees
  • Whilst RIO is not a Lifetime mortgage it is effected by this market


  • Affordability rules by lenders are very strict
  • Lending into Retirement which covers RIOs and Lifetime mortgages is an increasing important but potentially vulnerable market
  • More consumers want to take their mortgages into retirement hence growth in demand for RIOs
  • Advice in this market is critical and there is still a lack of supply in this area
  • RIO market is still immature so cannot determine if demand is led by “aspirational” funding or “distress” funding. Lenders still assume it is the latter!
  • Are lenders still using 20th century underwriting rules to meet a 21st century type of consumer demand?
  • Lenders need to have funding models to support RIOs


  • For 55-65 year olds RIO is usually a better product than lifetime mortgages. 70+ is lifetime mortgages “sweet spot”
  • Some lenders are dipping their toe into the water by offering RIOs to their existing customers to help support their needs
  • More qualified advisors are needed to give lenders the confidence to offer these products
  • Common consensus that this is a product of the future
  • Lenders should view RIOs as medium term loans (i.e. 5 or 6 years); a kind of “bridge” between standard residential mortgages and lifetime mortgages
  • Therefore the group in the main felt RIOs are a carnival samba not last waltz for Lifetime Mortgages!