The Financial Conduct Authority has warned advisers it needs to look again at the equity release market to make sure it is working in the best interests of consumers.
According to its business plan 2022-23 published today (April 7), the FCA said more people were reaching retirement either owning their homes outright or with a mortgage.
The lifetime mortgage market caters to those who want to use the value in their home to meet their later life needs.
“Given the significance of these decisions for consumers, we are considering the work we need to do to ensure that the market is working well,” the regulator said.
The FCA said: "This could include following up on our earlier findings about poor quality advice and checking that standards among intermediaries giving advice have improved."
In 2020 the FCA sounded alarm bells over unsuitable equity release advice after a review found some mortgage advisers were falling short in the market.
The warning came after the regulator said it would be carrying out a more detailed follow-up review of advice in the lifetime mortgage market as part of its ongoing supervision of mortgage intermediaries.
In a review published at the time the FCA said its work in the equity release market had uncovered mixed results, with some cases where lifetime mortgages were working well and unlocking equity for consumers who could not afford traditional mortgages.
However it also found the reasons behind consumers looking at equity release were not always challenged by firms and advisers were not always able to evidence their recommendations were suitable.
The review was undertaken by the regulator as part of its exploratory work on later life lending, considering the borrowing opportunities available to consumers aged 55 and over - some of whom may be more vulnerable.
In today’s plan, the FCA said its work in this space could include following up on its earlier findings about poor quality advice and checking that standards among intermediaries giving advice have improved.
Source: FCA's The equity release sales and advice process review 2020
Last month, the Equity Release Council made product innovation, specifically the ability to make penalty-free partial repayments, a “standard feature” for all equity release providers.
The change was aimed at trying to reduce the effects of compound interest and cut overall later life borrowing costs for customers.
The council has previously calculated that there were £78mn in penalty-free partial repayments made by customers last year through providers which offer the feature. These repayments, the council said, have reduced these customers’ interest costs collectively “by almost £100mn” over the next 20 years.
sonia.rach@ft.com
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