Equity Release  

Lifetime mortgages: Opening the door to innovative lending

The proposed changes to KFI projections would help facilitate a more personalised picture, offering tailored illustrations that reflect individual customers' circumstances by estimating the product using a different – and more appropriate – measure to the standard mortality tables. 

Many feel the FCA consultation has presented the industry with an opportunity to stimulate innovation and choice, which will in turn benefit end consumers. The FCA has taken the first steps, but it remains to be seen whether more firms will enter the market. 

Lifetime lending is set to break the £2bn barrier by the end of the year and by 2020 is expected to hit £5bn. More entrants will no doubt support this growth, but that is only one piece of the puzzle. In order for the market to grow, we not only need to address supply and demand, but also make advice more accessible.

This is a market still dominated by a small number of specialist firms. The top six in the UK, with about 350-400 individual advisers between them, produce the bulk of equity release sales. If more advisers were to enter this space, more borrowers would be able to learn about the pros and cons of lifetime mortgages and decide whether they could be suitable for their particular circumstances.

Even if an adviser does not hold the necessary equity release qualification, they could still discuss the idea of a lifetime mortgage and refer the customer to a specialist advisory firm if necessary. 

It would be good to see the ERC, FCA and CML, together with lenders, specialist advisers and other stakeholders, unite under a common banner to encourage greater product innovation and ensure advice remains at the heart of this sector. This is no longer a niche market; it has matured into a specialist financial planning area and the industry needs advisers, trade bodies and councils to come together to ensure lifetime lending is fully integrated into broader retirement planning strategies. 

Many feel the FCA consultation paper could play a key role in encouraging more lenders and funders to enter the market, which would help to increase competition and widen the choice available to consumers. This new wave of market entrants, coupled with more advisers coming into the sector, could contribute to a tripling of the market size. 

Stuart Wilson is channel marketing director at more 2 life

Key points

The FCA has confirmed it is planning to scrap the requirement to carry out an affordability assessment altogether, where interest payments are anticipated or required, on lifetime mortgages.

The affordability conundrum has been restricting entrants into this market.

This is a market still dominated by a small number of specialist firms.