Mortgages  

Firm updates products after FCA equity release rule change

Firm updates products after FCA equity release rule change

Retirement Advantage has launched an enhanced range of equity release products, which do not require affordability assessments to be completed as part of the application process.

These are a response to the Financial Conduct Authority’s decision in April to offer modified rules around these assessments for hybrid lifetime mortgages.

Lenders are now able to apply for a rule waiver to allow them to “switch off” affordability assessment for borrowers offering interest-charging lifetime mortgages that can convert to roll-up.

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According to Retirement Advantage, its enhanced products are a first in the interest-paying lifetime mortgage market and will ease the application process for consumers and advisers, while retaining important safeguards.

In line with the rules, the products require no proof of income or expenditure on behalf of the applicant and there is also no need for customers to give details of unsecured loans. In addition, they retain the flexibility for customers to switch to an interest roll-up mortgage if they wish, without facing repossession.

Alice Watson, product and communications manager at Retirement Advantage Equity Release, said the regulator’s change will open the door for new products.

“There’s no doubt that these changes to our flagship interest select products will smooth the application process and make lives easier for advisers and customers alike,” she stated.

“Critically, though, these products retain all the safeguards customers expect from equity release products. In addition to the safeguards, the financial adviser providing the recommendation will still ensure making payments is the right thing for the customer and their financial circumstances.”

The modified product features apply to Retirement Advantage’s interest select options, where customers can choose to pay some or all of the interest each month. Their lump sum and voluntary select options remain unchanged.

Dean Mirfin, technical director at Key Retirement, confirmed the provider’s claim to be the first to benefit from the recent modification to affordability requirements introduced as part of the MMR.

“This modification, and final rule changes which will follow in due course, are essential in enabling older borrowers to access certain types of lifetime mortgages. The FCA listened to the case for a change and have taken action having understood the issue for products which have no default risk due to their being no contractual requirement to make interest payments.

“This is the first step for further extension in the range of serviceable products and we can expect more to follow.”

peter.walker@ft.com