The equity release industry is reaping the rewards from recent changes to mortgage market rules which have hit retirees and were branded “extraordinary” by one industry expert.
Speaking at a retirement debate organised by the Equity Release Council yesterday (19 May) afternoon, Age UK’s head of public policy Jane Vass bemoaned the fact automatic age limits for retirees still applied following the Financial Conduct Authority’s Mortgage Market Review last year.
Recently the Financial Ombudsman Service upheld a customer complaint after HSBC refused to give him a mortgage on the grounds that he would have been over 65 at the time of the term end.
Ms Vass said: “I find it extraordinary that auto age limits still apply with the MMR, it should be enough to allow proper underwriting for those over the age of 65, given how many people continue to work past their retirement age.”
She commented that equity release is an important product, but added that the charity’s preference is for a more open standard marketplace in the first place. I would rather start with standard market and push out,” Ms Vass added.
In March, the regulator conceded that as part of its plan for next year, there would be an assessment of how lenders are implementing the rules, following failings in transitional arrangements which left legacy and interest-only borrowers ‘trapped’ in existing mortgages.
Nigel Waterson, chairman of the Equity Release Council, said that this unexpected fallout from the MMR has been helping the sector grow at a record pace, pointing out that lifetime mortgage providers have been of great benefit to those left stranded by the recent rule changes.
David Thomas, president of the Personal Finance Society, agreed that the MMR had a big impact on the market, accusing lenders of ignoring older people.
“It’s a complex area, so clearly advice is key,” he stated. “The range of products has been quite staid and expensive to date, but the range is increasing, with more hybrids bringing the price down and more competitors are benefitting the market.”
Paul Johnson, director at the Institute for Fiscal Studies, said that it was surprising that the age group which statistically have the highest growing employment and accumulated wealth were unable to get a standard mortgage.
He also called out the government for essentially disincentivising the logical downsizing of retirees houses to pay for things like living expenses and care.
“The main blocker to people doing this is stamp duty, which is only marginally less stupid now than it was before the autumn... the government should get rid of these disincentives to enable people to take the simplest course of action.”
peter.walker@ft.com
