Q: I am a mortgage broker who offers equity release products to my clients, how will the mortgage market review affect this area of the market?
A: Whilst much has been made of the impact the Mortgage Market Review (MMR) will have on the mainstream mortgage market and mortgage brokers, these changes will also have a significant impact on those advising within the equity release industry.
Despite the fact that the implementation of MMR changes occurs next month, our recent research found that many advisers are not yet prepared for the new rules.
Our survey of equity release advisers found that that just over half (52%) are fully aware of the forthcoming changes that are coming into effect, with one in ten (8%) admitting that they have no idea what the MMR means for them and their business.
Under the new rules execution-only sales will be barred for certain types of borrowers, including those who take out an equity release product. The non-advised sales process is also to be removed. This can only be a positive thing for consumers as it will serve to ensure that clients fully understand the products available and choose the solution that best suits their needs.
Rules and guidance set by the Equity Release Council, and followed by their members, have for a long time required all equity release sales to be advised. It’s good to see the wider mortgage market taking on these principles too.
However, one of the most noteworthy changes for providers that offer interest-repayment lifetime mortgages is that they’re now responsible for assessing whether a client can afford to service a lifetime mortgage. Until now this requirement has been with the mortgage adviser, and the change will see lenders asking for much more information about a customer’s current and future retirement income.
Our research shows that adviser opinion is divided as to what impact the MMR will have on their business. Indeed, whilst half of advisers expect the MMR to have a positive impact on their business, a third believe they will be negatively impacted.
Only time will tell what the reality will be, however I believe that the MMR rules will help to further safeguard clients who decide to take out an equity release product which can only be a good thing. Ultimately for this to happen, advisers need to be making every effort to review their business in order to ensure compliance.
