Speaking to Mortgage Solutions, Chris Buchanan, head of product at Pure Retirement, said the feature – which it launched last year – had been successful, and while he had predicted it would be popular, it “exceeded his expectations”.

Borrowers can repay between 25% and 100% of their interest for a discounted rate and Buchanan said the majority opted to make the full payment. 

“I’m not really surprised there are so many making 100% payment, because I think that the large part of the target market will be people who have had an interest-only all of their lives and they get to retirement and need a solution for this mortgage. 

“But they’ve been paying all their life. Therefore, they expect and want to continue doing the same thing,” he added. 

He said it was “encouraging” that borrowers could pay the interest as it benefitted them overall due to the lender giving a full discount, regardless of how much interest is repaid. 

Sponsored

How the housing landscape is set to shift

Sponsored by Halifax Intermediaries

A discount of between 0.65% and 0.3% is available and is subject to changes due to pricing. The product also has a drawdown facility, and the borrower can choose to service interest on the additional amount borrowed. 

Further, borrowers can take up to three payment holidays per year, which Buchanan said was better than other options in the market, which only allowed three payment holidays over the whole term. 

He said this gave the borrower “the maximum opportunity to retain that discount for as long as possible”. 

Borrowers cannot amend the amount of interest serviced, which Buchanan said was important to give funders certainty. However, they can amend the interest serviced on amounts they drawdown. 

More innovation coming? 

He said all mortgage markets had become “quite commoditised”, and it was “increasingly difficult to differentiate” between product offerings. 

“Invariably, if you look at all of these products, you’ll see most lenders differentiate on price, through LTV or criteria,” Buchanan added. 

He said there were standard features available in the later life market, but greater choice could be offered through drawdown facilities, how frequently they could be taken, the minimum amount, and lender service. 

“Interest servicing has a lot more to give. I genuinely [think] it will be quite transformative for the market, I do think we will increasingly see interest servicing options, which will provide better value,” Buchanan added. 

He said the market was “at the start of that journey” and there would be a continued move toward these products. He also said interest servicing would fill the gap left by hybrid products. 

This year, he predicted the later life market would see growth and hopefully return to where it was in 2023. 

He also said there was a lot of innovation and change in 2024, and expected to see more in 2025. 

Agility in decision-making 

Buchanan, who has worked for Pure Retirement for almost two years, said the lender’s structure allowed it to make decisions easily, as it was “agile” and could “move quickly”. 

Pure Retirement has multiple funders, which allows it to take ideas to each one and see which proposition they would be willing to back, depending on their risk appetite. 

“It means we can be more innovative [and] more creative. Even if it doesn’t quite work for one funder, there’ll be another it does work for,” he added. 

When Buchanan joined the business, the market was going through a “challenging time”, which meant the lender had to be careful in its thinking. 

He added: “When you’re in a much more buoyant market, you can afford to make mistakes, you can take more risk and do things that don’t necessarily play out. But when you’re in a very tough market, you’re scrapping for market share, and you have to be a lot more sure about what you’re doing.

“If you’re going [to] make a change, then you have to know it’s going to work, because if it doesn’t, then that’s a problem.” 

When joining the lender, Buchanan aimed to diversify Pure Retirement; something he said he was already starting to achieve. 

He said its offering used to be quite niche and the lender had “a lot of eggs in one basket”. In Buchanan’s time, Pure Retirement has introduced high loan to values (LTVs) and cashback, changed its fees and launched interest servicing.

“That’s the way to success – making sure you’re operating across a broad range of opportunities. Being niche in that sort of environment is challenging; you have to diversify,” he added. 

He said the later life market had been through a lot of change and there were still segments that needed to be unlocked through product and distribution. 

Buchanan said: “If another lender comes out with something great, I’m supportive of it because that unlocks the market. I don’t think: ‘Oh, why didn’t we do that?’ or ‘Why have they done that?’. 

“I think: ‘Great’.”