Leeds Building Society launches more flexible home lending products
Demand from borrowers for more flexible home lending products has resulted in more offerings from the Leeds Building Society with the aim of improving lending into retirement and borrower choice.
The Society has increased the maximum term from 25 years up to 40 where the customer is borrowing past their stated retirement age and borrowers who are within 10 years of their stated retirement age, or whose loan extends more than five years into their retirement, will continue to be underwritten on the lower of current earned or future pension income.
Affordability for those borrowers with more than 10 years to their stated retirement age will be assessed on their current income. So, for example, an applicant aged less than 60 years old intending to retire at 70 will be assessed on current income, where the loan does not extend beyond the age of 75.
‘The age at which people now step onto the property ladder is increasing so logically their age at the end of their mortgage may also be higher,’ said Richard Fearon, Leeds Building Society’s chief commercial officer.
‘There’s also greater flexibility over when people choose to retire, which can affect their ability to pay for a mortgage. The new pension freedoms mean more choice about when to access a savings pot but most people don’t decide how to use their retirement fund until close to the time they stop work,’ he pointed out.
‘As the UK population ages and life expectancy increases, this market is only going to grow and lenders need to address the changing needs these demographic shifts are creating. These changes include younger borrowers choosing a longer term, which means their mortgage could continue into their 60s or 70s,’ he added.
He also added that Leeds Building Society will continue to restrict lending into retirement to a capital and interest basis, while applications using pension income will be assessed by specialist underwriter
The Society has also launched a new 10 year fixed rate mortgage at 2.75%, with no Early Redemption Charges after five years which is available up to 65% LTV (Loan to Value) and has tapered ERCs for the first five years.
‘We’ve had feedback from lots of customers looking for long term stability but reluctant to tie in for a full 10 year period so they choose a five year deal instead,’ said Jaedon Green, Leeds Building Society’s director of product and distribution.
‘This deal is a good compromise, being able to redeem without penalty after five years gives these borrowers the security of a 10 year fix if they want to stick with it, but the flexibility to switch or pay off their mortgage after five years if they wish. The potential cost of remortgaging is something borrowers don’t always take into account, which is another reason why longer term deals will suit some people,’ he added.
The Society has also cut the rate on its conventional 10 year fixed rate mortgage to 2.55% and reduced the fee to £999. This is available up to 65% LTV. All Society fixed rate mortgages are portable, subject to the borrower meeting affordability requirements at the time of porting.