Retirement interest-only mortgages: what are the best rates?

Nationwide's retirement interest-only mortgages (RIOs) are now available to all borrowers, even those who are not already customers. But does the building society offer the best rates?

A RIO mortgage allows you to borrow against the value of your home past retirement age. Nationwide entered the growing RIO market in April, announcing a range of later-life lending products that only its members could apply for.

Now, the nation's largest building society has opened these deals up to everyone. We compare the best RIO rates, and see which lenders will actually lend in your area.

What is a RIO mortgage?

RIOs are designed for homeowners in or approaching retirement. Like with an interest-only mortgage, you only pay off the interest accrued on your mortgage each month, not any of the capital.

With most RIOs, the balance is repaid by selling your home when you die or move into long-term care.

RIOs are suited to older borrowers who will struggle to afford a repayment mortgage on their pension income. Though some have questioned their affordability, in many cases they offer a lifeline.

• Find out more: retirement interest-only mortgages explained

What are the best RIO rates?

Just paying interest is generally cheaper than paying off the capital as well. But how cheap your payments are will depend on the interest rate.

Below, we've listed the RIO mortgage deals with the lowest initial rates. We've split the table up into fixed-rate and variable rate deals.

All of these mortgages have two-year initial periods.

The average initial rate for a two-year RIO (fixed or variable) is around 3%. That's roughly the same as the average rate for all mortgages, according to Which? analysis of Moneyfacts data.

Other things to consider

Keep in mind that interest rates are not the only thing you should think about when choosing a mortgage deal.

It's important to look at other factors such as fees, customer service and terms and conditions.

Each year, Which? combines real customer feedback and expert analysis to find the best mortgage lenders.

In our most recent review, RIO provider Nationwide was declared a Which? Recommended Provider with a 77% customer score. Leeds Building Society scored 70%, but most other RIO lenders didn't get a score due to sample size.

Which building societies will lend in your area?

Before Nationwide entered the fray, the majority of RIOs were offered by small, locally based building societies.

Many of them are named after the counties they are based in, but most will lend outside of their local area.

According to Which? research, Nationwide and the Leeds Building Society are the only RIO providers that serve the whole of the UK. The majority of the others lend in England and Wales, and some also cover Scotland.

The table below lists all the building societies that offer RIOs (according to Which? analysis of Moneyfacts data) and the areas that they offer mortgages for.

Type your country into the search bar to see which lenders you could apply to.

If you live on one of the UK's islands or crown dependencies, you might struggle to borrow from many of these lenders. Contact them, or a mortgage broker, to find out.

RIO mortgage alternatives

Getting a RIO mortgage is just one of the options older borrowers have.

A lifetime mortgage is similar to a RIO, in that you pay it off by selling your home. But instead of making interest payments, you don't pay anything month to month. The downside is that interest will still build up, making the final bill much higher than it would be with a RIO.

Lifetime mortgages are the most common form of equity release, a way to 'withdraw' cash from your property's value to fund retirement.

Another way to 'unlock' value from your home is to move out and relocate to a smaller property.

If you're willing to move home, downsizing can come with a number of benefits - financial and otherwise. You could move to a better location, and into a home that will be easier to manage in your old age.

• Find out more: our guide to downsizing