The Kent Reliance inter-generational mortgage allows parents to leave their property, and home loans to their children. It confirmed borrowers would be able to take out an interest-only mortgage, with the repayments, and property transferred to their children when they die.
However this move has sparked industry concern.
Harry Katz, principal at Norwest Consultants, said: “Not content with making good money out of existing borrowers, lenders want to extend it to future generations. Why not rent instead? Borrowers would be able to negotiate a good deal if they signed up for a long period. With the correct break clauses, borrowers could always walk away and in general maintenance would not be their concern.”
A broker, who wished to remain anonymous, added: “The deal is equity release, just under a different title.”
Rob Procter, deputy chief executive at Kent Reliance BS, refuted suggestions that the product promoted irresponsible lending. He said: “Kent Reliance has one of the lowest arrears in the industry and we are very keen to ensure we are lending responsibly. We developed the scheme in response to customer demand. After contacting our interest only customers, some said they wanted to give the property to their children once they died, and asked if this could be factored into the mortgage, which we have developed. We still assess the borrowers’ ability to pay the mortgage.”
Christopher Dean, spokesman for the Council of Mortgage Lenders (CML), said: “Inter-generational mortgages are another example of how the industry is offering more choice to consumers. However, it is important to remember that taking out an inter-generational mortgage will have implications for the children later on, and so they need to be fully involved in the decision making process.”
