MortgagesNov 10 2015

FCA tells lenders to up their game for elderly borrowers

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FCA tells lenders to up their game for elderly borrowers

Speaking at the Council of Mortgage Lenders’ annual conference this morning, the FCA’s director of retail supervision and authorisations Jonathan Davidson, said that the market must “act on whispers before they become screams”.

He warned that the number of people aged over 80 is set to more than double in the next 25 years, which means there is an increasing demand for a broader range of products to meet these changing needs.

“The home is now seen as a pension. A way to pay for long-term care and as something to pass on but equity release is not the panacea for this problem.

“We’re keen to support innovation in this area. It is as much an opportunity as a challenge.”

His comments came as the CML published an independent research report on consumer demand for retirement borrowing.

With a 51 per cent increasse in the over-65 population projected between 2010 and 2030 - and a 101 per cent increase in the over-85 population - the report concluded it is vital to promote sensible and suitable mortgage finance to support both the aspirations and potentially the social care costs of older home-owners.

David Hollingworth, associate director for communications at London and Country Mortgage, said of the CML research: “It’s extremely encouraging to see another report looking at how well the market is or isn’t providing solutions for older borrowers. The need for a more measured stance on lending into retirement is a consistent message but these reports hopefully signify that there is a genuine desire to change things for the better.

“As life expectancy increases the need for appropriate lending products for older borrowers is only likely to grow. The recent tightening in criteria has seen the options contract not expand, so it’s important that lenders work with the regulator to find areas where they may have taken an over cautious approach as well as on the development of more innovative ways to help.”

Tackling the looming probability of the base rate being increased next year, Mr Davidson drew on CML statistics that suggested around one million people will end up paying more every month should the base rate increase.

Mr Davidson also urged lenders to think about how this will impact their more vulnerable customers.

He said: “It is important to understand and review your exposure. This is a complicated operational problem, but one we need to tackle.”

In terms of maturing interest-only mortgages, Mr Davidson stated this was an area where there has been a strong precedent for joint problem solving.

“The maturity profile in outstanding loan-to-value mortgages is set to peak in 2017 to 2018,” he added.