Spanish bank Santander is reportedly set to begin offering 'lifetime mortgages' to older homeowners in a bid to tackle the mortgage 'timebomb'.
The loan could be offered to people in their 50s and 60s with interest-only mortgages who will be unable to pay off their property debt at the end of the 25-year term. The 'lifetime mortgage', which could be on offer as early as next year, would allow homeowners to continue paying only the interest on the debt, provided they agree that the house is handed over to the lender after their death.
The lower monthly repayments of interest-only deals tempted many homeowners in the past, but figures from the Financial Conduct Authority reveal that around half of the 130,000 that expire each year cannot be paid off in full, with the average shortfall a sizeable £71,000.
Industry experts say other major banks may also soon offer such 'lifetime' deals in order to combat the problem. Though signing up for such a loan would mean the homeowner could remain in their own property for life, it would be the bank, and not the family, that would benefit in the event of their death, with the house being sold and the proceeds going to the lender.
Steve Pateman, head of UK banking at Santander, told the Financial Times: "We have got to find a way to help people and we can't just put them in a sausage machine and process them so they are out of their houses in six months."
However, experts have suggested that these long-term secured loans should only be considered a 'last resort'. Steve Lowe, from financial services firm Just Retirement, told the Telegraph: "It would be unacceptable for borrowers to default to a lifetime mortgage as these types of loans require specialist advice, with families sitting down to discuss the consequences over many months before signing on the dotted line."
What do you think? Would you be prepared to sign up for a 'lifetime mortgage'? Leave your comments below...