More firms should give advice on both residential and lifetime mortgages to provide a better service for later-life borrowers, according to the Council of Mortgage Lenders (CML).
The proposal has been made as part of a series of measures aimed at developing a more joined-up approach to later-life lending, which – according to research from the CML and the Building Societies Association - is currently divided into two different schools of thought.
While residential lenders and intermediaries tend to view lending as a means to accumulate equity and a retirement free of debt, the equity release sector sees borrowing in later life as a means to help customers extract value from the accumulated equity.
The division means borrowers who may need to move between the two markets, or who may wish to weigh up the advantages and disadvantages of each market, find there is no single obvious place to go, and no joined up framework for addressing their needs.
According to the CML, further investigation is needed into the reasons why some advisers with regulatory permissions to advise on lifetime mortgages choose not to discuss this type of product.
The CML stated the single public financial guidance body, due to be introduced from Autumn 2018, should explore ways of increasing the provision of fuller information sources available to older consumers, and these need to be integrated with pension guidance.
Better products are also required, with more flexibility on later life mortgages and alterations to affordability criteria and repayment mechanisms, the CML concluded.
Later-life lending is a growing market and holds significant potential for further expansion.
Households headed by individuals aged 55 plus account for 46 per cent of the total (11.8m households), with the over-55s holding £6.4 trillion of wealth and £2.5 trillion of property wealth.
June Deasy, head of policy at the CML, said: “With advice regimes segmented due to different regulatory conduct rules and permissions, different types of adviser and different product heritage, CML has long called for a smoother experience for consumers.
“The research shows that consumers can see a disconnect between their need and the service provided, and a desire for clearer signposting to their options. CML believes that government is best placed to facilitate this signposting role, as it develops its single financial guidance body.”
Nigel Waterson, chairman of the Equity Release Council, said: “We agree with the CML that the mainstream mortgage and equity release markets should strive to work more closely.
“In doing so, the best possible outcomes can be delivered for consumers and we are always open to the opportunity to work with other industry bodies and regulators to achieve this goal.
“We hope that by working collaboratively, we can make further progress in joining the dots between equity release, residential mortgage, and pensions.”
But Alistair Cunningham, chartered financial planner at Wingate Financial Planning in Surrey, was more skeptical of the proposals.
“We see it as totally different aspects of advice,” he said. “Lifetime mortgages/equity release is part of later-life advice – with that comes cash flow plan alternatives like appropriate investment and annuities, that sort of thing.
"And very often people access equity release from their property on the basis of an immediate need.
“That is very different to a conventional mortgage when someone is looking to buy a home to live in. There is no commonality between the two.”
simon.allin@ft.com
