Call for radical shake-up of later life mortgage advice

Call for radical shake-up of later life mortgage advice

Standards for advice on later life products should be reviewed as the market expands and more products enter the scene, a provider has said.

Advisers wishing to advise on equity release products need to have specialist qualifications but those advising on new products such as retirement interest-only mortgages do not.

Dave Harris, chief executive of equity release provider More 2 Life, said this creates an uneven playing field.

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He said the market needed advisers to look at the whole palette of products that are available to achieve the best customer outcomes and by grouping products there was a danger advisers who don’t hold the extra qualification may not consider equity release or vice versa.

Mr Harris said the regulator should find a way to group all later life mortgages under one umbrella with the same advice standards.

But this does not necessarily mean changing the qualifications required, it could mean putting in place a robust referral system, he said.

Mr Harris said: "There is a degree of clarity that is required. As the market grows we need to ensure the quality barrier of advice is reset to cover all products.

"Otherwise there is a danger people might not realise they have [other options]."

Referral deals are already in place with firms such as More 2 Life’s sister company Key Retirement, which runs business to business referral service Key Partnerships.

In March the Financial Conduct Authority (FCA) decided to pave the way for the wider distribution of retirement interest-only mortgages by separating them from equity release and classing them as standard mortgages instead.

This meant they no longer require advice, although the regulator believes in practice they will still be sold on an advised basis under standard mortgage rules.

Retirement interest-only mortgages are available to borrowers above a certain age and allow them to keep paying monthly interest payments until they die or go into long-term care. 

They differ from equity release in that they don’t eat into the equity of the property as part of an interest roll up plan.

The FCA sees the products as an additional option alongside downsizing or equity release, as well as a solution for customers with maturing interest-only mortgages.

Mr Harris believes the market will expand rapidly in the coming years as more alternative funding from the likes of pension or sovereign wealth funds will become available to lenders.

More 2 Life itself is looking to launch the whole palette of products as soon as possible, he said.

The firm recently entered a deal with a global re-insurer complementing the capital stream from traditional life insurers to help it free up some space to innovate, he said.

More 2 Life estimates the size of the retirement lending market to be about £86bn and to grow to £142bn by 2027.

Rival provider Aldermore Bank agreed with this projection last month.

Launching its own later life mortgage, the bank argued the market was underserved by lenders, with mainly building societies and some specialists offering this options.