FCA contemplates holistic advice for mortgage borrowers

FCA contemplates holistic advice for mortgage borrowers

Consumers looking to get a mortgage should have access to “holistic advice and guidance”, according to the Financial Conduct Authority.

The paper, which looks at access to financial services in the UK, stated consumers should be given help to consider borrowing in the context of other circumstances and goals, such as pensions, possible future care needs and inheritance.

It also said the task of assessing whether someone could still afford a mortgage in the future had become more challenging.

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“The main risk with most mortgages is that the borrower becomes unable to afford the repayments, although this is not an issue with lifetime mortgages as usually no periodic payments are required,” read the document.

“The inclusion of future changes in income and committed expenditure is challenging, especially where the mortgage term would extend into retirement or the applicant is already retired.

“It has become more difficult with the introduction of pension freedom and choice and the deferral of measures that would have provided some cap on care costs.”

According to data published in the paper, mortgage terms are getting longer, while first-time buyers are getting older.

The regulator went on the flag up concerns expressed by the Council of Mortgage Lenders that mortgage advice alone may be inadequate for decisions about mortgage borrowing into or in retirement.

It noted the CML’s suggestion that the remit of the Pension Wise guidance service could be extended to give more holistic information and support across retirement issues and that mortgage advisers may need to have more holistic expertise in future.

The Building Societies Association has also said it is working with the insurance industry to find insurance-based solutions to help older borrowers.

These might include some form of mortgage indemnity policy to protect the lender if the borrower becomes unable to maintain their loan because of a change in circumstances.

Adviser View

Mike Richards, director of London-based Mortgage Concepts Associates, said: “I understand the idea but the problem is that most pure mortgage advisers are not licensed to give advice on things like pensions and investments.

“It is a nice idea but it is a very difficult thing to suggest. I don’t think many mortgage advisers are going to go and take all the exams to become full advisers.”