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Reliance denies ‘never-ending’ mortgage will encourage debt

Society cites flexibility of intergenerational loan

Kent Reliance Building Society has hit back at criticism of its interest-only mortgage that can be passed down the generations.

A number of commentators have claimed over the past week that the mortgage fosters a debt culture as the loan can be passed on to children. It has also been attacked for costing more than a conventional mortgage if borrowers or their heirs keep the mortgage for longer than 25 years.

Kent deputy chief executive Rob Procter defends the product and claims jealous rivals are trying to undermine the package as Kent came up with the idea first.

He insists the proposition gives more flexibility to borrowers and their children as they can opt to pay off the loan at any time or continue it.

It works as an interest-only loan where, in theory, no capital needs to be repaid at any point, making it a never-ending mortgage.

The mortgage can also be used to mitigate inheritance tax as any debt left outstanding is subtracted from the value of the estate.

If the heirs cannot afford repayments on the loan, then the mortgage will have to be redeemed by selling the property or in cash.

Procter says: “It is a simple product as it is allowing a conventional mortgage to be passed on. There is no misselling issue as some people have suggested. It is jealousy that people have not thought of this first. I would be happy to have that debate with anyone as we are comfortable with the product.”

Chase de Vere Mortgage Management director Nick Gardner says: “It is a welcome development and there is no reason why you should have to repay something in 25 years.”

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