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FCA must consider its own culpability in later life lending sector issues

by: Stuart Wilson, managing partner of Later Life Academy
  • 09/10/2017
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FCA must consider its own culpability in later life lending sector issues
The Financial Conduct Authority’s (FCA) recently published paper on the results of its Ageing Population Project makes for interesting reading for brokers and lenders alike.

There is clearly a lot in it about the perceived lack of later life lending opportunities for borrowers, and how both lenders and advisers fit within the existing framework.

But there is some veiled (and not so veiled) criticism, particularly when it comes to product choice – or a lack of it – aimed principally at lenders but also whether advisers are doing enough to signpost choices for clients, especially when they might have been declined a product on the grounds of age or affordability.

 

Regulator culpability

While there might be a kernel of truth in these points, there has to be a certain degree of culpability on the part of the regulator when it comes to these issues.

After all, let’s consider the impact of the Mortgage Market Review (MMR) on the later life lending market when many lenders interpreted the rules in a very, shall we say, gold-plated manner resulting in far fewer products for those who wanted a mortgage past a traditional retirement age.

At that point – and since – there’s been a cautious approach adopted because lenders were fearful of being censured for going beyond the parameters of the rules. When your regulator wants you to prove affordability, you need to do as it says – what did happen though is that later life borrowers became the victim of these tighter affordability measures.

 

Active involvement

To be fair to the lenders, and I think it’s possible to see this far more recently, we have begun to see a thawing of that type of measure and far more later life lending products are coming to market, plus we’ve seen maximum age limits for borrowers rising too, not forgetting of course the significant growth in equity release.

That said, are we at a stage where we can be truly comfortable with the product choice available to those in later life? Obviously not, but we can’t really blame lenders for being cautious in this area, especially given the greater risk that is perceived to exist by some.

However a number of lenders are either actively involved or looking at their product options – significant progress from what we had 12-18 months ago. Interest-only mortgage replacement options are now, if not commonplace, then certainly available and we fully anticipate other lenders moving into this space.

For advisers, it is true that being able to confidently compare later life products (including equity release) has been difficult to a point.

Whether I would describe criteria and affordability assessments as “opaque or nuanced” is another matter – this is certainly a product area whose complexity is beyond what advisers would find in the mainstream residential market but, with the help of sourcing systems, it is possible to accurately compare all the product options on the market, whether these are mortgages or equity release options.

That is a huge step forward for all those active in this sector.

 

Taken seriously

The positive that the FCA should take from this is that, although the sector might not currently be running at a capacity it would like, it’s obvious to all that the later life market – be that lending and/or advice – is being taken incredibly seriously.

We are actively involved in the push for more advisers to offer a wide range of later life advice services because we envisage much greater demand for advice from this age group in the months and years to come.

Clearly, the products have to be there as well, but we are moving towards this (perhaps at a slower pace than we would like) and given that underlying demand I find it hard to believe that the sector won’t make huge leaps forward very soon indeed.

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