The Financial Conduct Authority was “disappointed” to find evidence of poor advice in the later life mortgage space as it moves to intervene "robustly" with firms to ensure improvements are made.
As part of the regulator's review of later life mortgage firms, the Financial Conduct Authority has worked with firms to improve their advice processes with nearly 400 misleading promotions being removed or amended.
The review focused on the complex equity release market, catered to older homeowners who want to free up money tied up in their homes to help meet later life needs.
The FCA found many cases where advice did not meet the expected standards, with firms being told to improve the quality of their advice.
Looking at firms responsible for around half of all lifetime mortgage sales, the FCA found shortcomings included not enough discussion of alternatives and a lack of sufficient consideration of a client’s individual circumstances.
The regulator also said it was disappointed to find evidence of firms not acting on its previous findings. For example, intermediaries were:
- poorly considering borrowers’ income and expenditure
- minimising discussions around alternatives
- incentivising sales potentially at the expense of quality advice and good customer outcomes
- steering outcomes in favour of lifetime mortgage products.
Following the review, most firms changed the way their advisers were incentivised after the FCA found the way this was being done was “potentially at the expense of quality advice and good customer outcomes”.
The FCA said: "We expect other lifetime mortgage advisers to pay close attention to the review's findings and act immediately where they need to. Anyone who believes they were poorly advised can complain to the firm and, if they are dissatisfied with their response, to the Financial Ombudsman Service."
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Releasing money tied up in your home later in life is a big decision and can have a financial impact on consumers and their families well into the future.
“Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them.
“We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the consumer duty.”
The review was welcomed by Leon Diamond, CEO and founder, LiveMore Mortgages, who said: “A fundamental part of an adviser’s role is to fully understand the income and outgoings of customers.
“This provides a clear picture of whether they can afford monthly mortgage repayments and should be the first option to consider. If an interest-only or a capital and repayment mortgage is not affordable then a lifetime mortgage could be the second option.
“Anything that improves the industry for the good of the consumer can only be a good thing and this report from the FCA is a strong reminder for every broker and lender to put the customer first.”
tara.o'connor@ft.com
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