The FCA’s recent consultation paper identified lifetime mortgages and RIO products as suitable options for over-55s reaching the end of interest-only mortgage terms.
Thousands of older homeowners approaching the end of their interest-only mortgage term may be unaware of alternative borrowing options available to them, according to later life lending platform Air.
The warning follows new data from UK Finance showing that 60,000 interest-only mortgages, worth a combined £9bn, are due to mature by 2027.
Air said many of these borrowers could be eligible for later life lending solutions, with the majority holding loan-to-value ratios below 50%.
For homeowners aged over 55, this means lifetime mortgages and retirement interest-only (RIO) products may be viable alternatives.
The company warned that borrowers who do not receive advice on the full range of available options could face unnecessary financial consequences.
These may include drawing on pension savings to repay mortgage balances, potentially triggering tax liabilities, crystallising investment losses or reducing funds available to secure retirement income.
Others may opt for repayment mortgages that require full capital repayments, placing additional pressure on household finances as they approach or enter retirement.
Some borrowers could also feel forced to sell homes they might otherwise have been able to retain.
Air pointed to the Financial Conduct Authority’s (FCA) recent consultation paper CP26/18, which identified lifetime mortgages and RIO products as suitable options for over-55s reaching the end of interest-only mortgage terms.
The consultation also highlighted the need for consumers to be made aware of the full range of options available to them.
The company said modern lifetime mortgages differ significantly from earlier products, offering fixed-for-life interest rates, flexible interest payment options and protections including security of tenure and a no negative equity guarantee.
Will Hale, chief executive of Air, said: “These are real people facing what can be a worrying deadline, and our industry has a collective responsibility to make sure they understand all their options.
“Advisers, lenders and sourcing platforms all have a role to play in ensuring later life lending is part of the conversation wherever it is relevant.
“A borrower with significant equity in their home and an IO mortgage maturing in the next two years has more options than they probably realise.
“But they will only benefit from those options if the right conversations happen at the right time.
“The data points to a large group of consumers who stand to gain from better joined-up thinking across the industry, and that is exactly what we should be focused on delivering.”