The Council of Mortgage Lenders has warned the Financial Conduct Authority more must be done to assist advisers in offering clients a range of at-retirement options that includes lifetime mortgages.
In its response to the FCA’s recent discussion paper on the ageing population and financial services, the trade body argued no specific products, services or methods of mortgage distribution are particularly associated with poor outcomes for older borrowers.
“But there is clear evidence, we believe, that some reforms – even on a relatively modest scale – could help older people,” noted CML spokesman Bernard Clarke.
He pointed to the regulator’s recent decision to let providers switch off the need to assess affordability for borrowers wanting to take out a lifetime mortgage which starts with interest payments, but can later be converted into a roll-up loan.
This change came about after pressure from the CML and the Equity Release Council, with Mr Clarke pointing out that several suggestions to improve the market were made in reports published at the end of last year.
“One key finding of those reports was only a small number of advisers are able to help older borrowers with residential and lifetime mortgages, while also offering financial advice,” read the CML’s response.
“This is partly because advisers are supervised under different regulatory regimes for these different activities.
“This compartmentalising of financial advice can also be reinforced by the way in which distribution has evolved over time of specific types of products, which have come to be associated with specific types of firm.”
Last year’s at-retirement reforms have made the problem more complicated, stated the CML, as older consumers may now need advice about both mortgages and pensions and how they affect each other; but there are few advisers qualified to cover both areas.
Regulatory requirements may also unintentionally create barriers for firms seeking to develop new products for this market, noted the CML, therefore recommending closer co-ordination between the FCA and the Prudential Regulation Authority to consider whether some liberalisation might help.
Paul Smee, CML director general, said he was keen to help members grasp the nettle of finding safe and appropriate ways of lending to older people in line with their needs and aspirations.
“We firmly recognise that sits within a wider framework of advice and service provision across financial services, and we would welcome leadership from the FCA, the PRA and HM Treasury to help this important agenda make progress.”
Steve Ellis, chief operating officer at Legal & General Home Finance, a recent equity release market entrant which has already racked up sales of over £200m, commented that lifetime mortgage customers are becoming more sophisticated.
He said: “We see this as a really positive development for the market, indicating increasing competition for customer business and better appreciation from consumers as to what this product can do for them.
“As the industry continues to grow and mature and competition increases, we would expect this trend to continue, which is great news for the customer.”
