Mortgages  

IFAs warn FCA on equity release ‘blind spot’

The industry also needs tougher regulation of retirement advice, he said, including more training and the requirement to disclose whether housing wealth is being considered when giving retirement income advice.

“The FCA is not held accountable for the good outcomes its regulation fails to encourage, only for the bad outcomes it fails to prevent,” he said.

Managing director at Wessex Investment Management, Kevin Bailey, said the FCA has been “reactive to too much” that has happened in financial services in recent years.

“We see in the media how easy it is for consumers to apply for equity release…and appropriateness. Too many are accessing equity in their property without fully understanding the implications.

“I and many others believe that equity release has been and continues to be a high risk product that far too many are walking into without fully investigating all the options,” Bailey added.

Former adviser Harry Katz said the “biggest rip off in financial services” will - and is - proven again through equity release.

“How this squares with the new rules on consumer duty only the FCA will know,” he said.

The consumer duty, which will be implemented in July next year, is a new regulation which outlines the regulator’s expectations on how companies treat clients.

Groups will be required to make it as easy for clients to switch or cancel products in line with the ease at which they can be taken out, and customer support will need to be helpful and accessible, alongside a number of other requirements.

McPhail warned that the combination of the cost of living crisis and declining guaranteed incomes will serve to exacerbate the rise in use of these products, which could prove hugely beneficial if regulated appropriately.

“It is time for policymakers to recognise the huge potential in this sector to help the cost of living crisis and the levelling up agenda.”

A spokesperson for the FCA said an increasing number of consumers are approaching 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. We will consider the recommendations in this review”.

sally.hickey@ft.com, ruby.hinchliffe@ft.com