I wonder how long this case dragged on, before they finally came up with this solution?
This is a fairly simple and straight forward solution, that should probably be rolled out for quite a few people over 60yrs of age, in similar situations.
Funds are cheap at present, so it would be relatively easy to agree to apply a fixed rate, or cap on the interest rate, enabling the future cost to be limited, for the borrower.
Once the exercise is completed, the loan can be reclassified, hence reducing the amount of capital the bank needs to put aside for it, and when you repeat for each loan, it notably reduces the level of funds the Bank has tied up, and justifies lowering lending rates.
Put a portfolio of these interest only loans togeather, and sell them off, if the Bank doesn't want to hold them.
Looks like a win for everyone.