The Bank of England’s Prudential Regulation Authority (PRA) has pushed back the implementation of a new set of rules governing equity release mortgages by a year, following industry feedback.
The proposed regulatory changes sought to bring in more stringent capital requirements around the calculation of the future value of homes in equity release mortgages.
This was designed to ensure insurers hold sufficient capital against any future risks arising from holding the assets.
The proposals were outlined in consultation paper 13/18 Solvency II: Equity release mortgages.
They were originally meant to be implemented by Monday 31 December 2018, but the regulator announced on Thursday (25 October) that it had pushed back this date by at least 12 months.
A spokesman said: "The PRA has decided that the implementation date will not be before 31 December 2019.
"The PRA is making this announcement now in order to clarify the position for insurers planning their year-end 2018 processes."
The regulator said it had given careful consideration to the initial consultation responses and would weigh up any impact the updated implementation date has on the proposed phase-in period.
It will publish final policy and supervisory statements "in due course", the spokesman added.
In response to today’s announcement, the Association of British Insurers, said the requirements that had been outlined in the consultation were considerable, noting that the regulator had made the right decision in pushing back the implementation date.
A spokesperson said: "Given the scope and significance of these changes, we called for their implementation to be deferred until next year to ensure that firms have sufficient time to prepare for them, so we welcome the PRA’s confirmation that this will happen."
Jazz Jhumat, a financial adviser at JJFS, agreed with the ABI’s assessment.
"It is an absolute minefield," she said. "The fact that they have thought to not bring in this new regulation [now] can only be good news for the sector.
"A lot has changed in underwriting practices over the past 10 years and lenders operate stricter underwriting models today.
"However, it is only right that the regulators spend time looking closely at valuations, as this is a market that is expanding rapidly, with new lenders coming in every week."
