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Leeds Building Society unveils 10-year fixed rate retirement interest-only mortgage

Retired and need a mortgage or want to cash in on your home? Leeds BS offers first ever 10 year fixed rate retirement interest-only loan

  • Lenders have begun to release more innovative deals for older borrowers  
  • Retired borrowers can now remortgage their interest-only loan when it ends
  • New deal from Leeds Building Society means borrowers can fix for 10 years

Leeds Building Society has launched a 10-year fixed rate retirement interest-only mortgage – the only one of its kind available in the market today.

Following changes to financial regulations last year retired borrowers can now remortgage their interest-only loan when it comes to an end – using the eventual sale of their property as a means of showing they can repay the debt.

Previously, only two and five year fixed-rate deals have been available. 

Now, borrowers can choose from a 3.99 per cent 10-year fixed deal up to 55 per cent loan-to-value and a 4.09 per cent 10-year fixed deal up to 55 per cent loan to value with £500 cashback.

Both deals come with a free standard valuation and a £999 product fee, which can be added to the loan.

Retired borrowers can now remortgage their interest-only loans when they comes to an end

Retirement interest-only mortgages can be helpful for customers stuck on old interest-only deals who are looking to remortgage to a lower rate, as well as those who want an alternative to equity release where they can continue to make monthly repayments rather than seeing their debt grow.

Several lenders offer this type of loan including Aldermore, retirement lender Hodge Lifetime and Tipton & Cosely, Bath, and Scottish building societies.   

Should you fix your mortgage for 10 years?  

One of the advantages of taking out a longer fixed rate is that you don’t have to worry about what happens to interest rates for a long time, which may be tempting with the Bank of England flirting with the idea of a rate rise.

The same security can be achieved by taking out a five-year fix, to a lesser extent.    

The disadvantage is that you are tied in to that lender and that interest rate for a full decade on a 10-year fix. 

As an example of where this can go wrong, eight years ago Co-op Bank had a 10-year fix at 75 per cent LTV at 5.29 per cent, with a £999 fee. 

At the time this was a competitive product, but the average 10-year fix today stands at around 2.50 per cent.

This makes a lot of difference over 10 years – around £306 a month, or £3,672 a year on a £200,000 mortgage taken over 25 years. 

Retirement-interest only mortgages are more expensive in terms of interest than standard capital repayment mortgages. 

However, the new deal from Leeds is fairly competitive compared to other retirement mortgages.

Hodge Lifetime’s five-year retirement interest-only deal is also fixed at 3.99 per cent, while Mansfield Building Society has a discounted rate fixed for five years currently at 2.99 per cent, but only up to 40 per cent loan-to-value.  

Compared to Leeds’ own two-year fix of 3.34 per cent, or five-year fix at 3.62 per cent, the society’s 10-year fix might seem like a good deal.  

>> Read more on retirement interest-only mortgages and how they compare 

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