The opportunity – let’s make ‘holistic’ realistic – Davidson

For those readers who haven’t had a chance to peruse it yet, chapter three signals a growing recognition that the UK mortgage market is no longer neatly divided between ‘working age’ borrowers and a niche equity release segment. Instead, mortgage terms running past state retirement age, clients not putting enough money aside for retirement and changes in demographics mean housing wealth is becoming central to financial resilience in later life.

The regulator’s conclusions are clear in that demand for later life lending will rise materially, but the market is not yet fully ready to meet that demand in a way that consistently delivers good consumer outcomes. The FCA’s response suggests a focused market study, a review of retirement interest-only (RIO) mortgages and a renewed examination of holistic advice, which all present a big opportunity for advisers, networks and lenders.

Feedback to the FCA highlighted several structural constraints. Capacity remains limited, with few lifetime mortgage lenders and a relatively small pool of specialist advisers compared to the mainstream market. Consumer awareness and trust remain low, despite significant product innovation such as the no-negative equity guarantee. Many customers still view later life lending as complex, expensive or irreversible, often engaging with it only at a point of financial stress or a last resort.

Advice complexity was another recurring theme. Later life borrowers felt they needed input from multiple professionals (mortgage advisers, financial advisers, tax specialists and solicitors) to simply understand their options. This fragmentation increases cost, delays decision-making and can discourage consumers from engaging at all.

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Forthcoming market study

Against this backdrop, the FCA has committed to launching a focused market study in 2026 to assess whether the market can evolve to meet future needs and what regulatory or competitive interventions may be required. Crucially, the study will be forward-looking, focusing on readiness and innovation rather than past conduct. Hopefully, this draws a line in the sand in terms of some of the questionable practices of years gone by.

The feedback statement also shines a light on RIO mortgages, which many respondents described as underused. Despite offering a potentially lower-cost alternative to lifetime mortgages for some borrowers, RIO volumes remain very small.

Regulation appears to be a key factor. In particular, the FCA acknowledged that its guidance on affordability for joint RIO borrowers has often been applied too restrictively. Assessing affordability solely on the lower-income survivor without considering likely changes to income or assets on death has led many lenders to hold back from the market.

The FCA’s intention to review this guidance and to consider even whether RIOs should be exempt from high loan-to-income (LTI) limits in line with lifetime mortgages is a welcome development. It reflects a broader shift toward treating later life borrowing as a continuum of options rather than a binary choice between ‘standard’ mortgages and equity release.

Defining holistic advice

Perhaps the most consequential issue is the meaning of holistic advice. While there was broad support for the concept, the FCA found no consensus on what holistic advice actually means in practice.

Some respondents favoured a narrow interpretation, ensuring advisers consider all mortgage-based options, including RIOs and lifetime mortgages, before making a recommendation. Others advocated for a genuinely integrated approach, where housing wealth is considered alongside pensions, investments, tax and later life planning.

The FCA rightly recognises that achieving this is complex. Regulatory silos, separate qualification frameworks and differing advice permissions all act as barriers. Importantly, there was little appetite for creating a new “enhanced advice” standard, which many feared would increase cost, reduce adviser numbers further and create a two-tier advice system.

As the regulator considers next steps, there are several practical principles that could help define what holistic advice should look like. First, holistic advice should be outcome-focused, not product-led. The starting point should be the customer’s objectives in later life, namely income sustainability, security of tenure, care planning and intergenerational goals, rather than whether a particular product fits a regulatory category.

Second, advisers do not need to be experts in everything, but they should be able to diagnose needs and coordinate solutions. A realistic model may involve a lead adviser who understands the full landscape and can either advise directly or make structured referrals to specialists, with clear accountability for the overall outcome.

Third, the regulator could support holistic advice by reducing distinctions within Mortgages and Home Finance: Conduct of Business (MCOB), particularly between mainstream and later life lending. Greater alignment of rules, disclosures and suitability requirements would make it easier for advisers to consider options side by side, rather than in isolation.

Fourth, qualifications and competence requirements should evolve pragmatically. Incorporating later life lending into the core mortgage qualification rather than relying on separate permissions could help normalise these conversations earlier in a customer’s journey. I can’t say education is a bad thing, but I might propose that continuous professional development (CPD) rather than new mandatory qualifications may be a more proportionate way to raise standards.

Finally, holistic advice should be timely and not reactive. Signposting and prompts as borrowers approach later life milestones, such as the end of an interest-only term or a fixed rate expiring in their 50s or early 60s, could encourage earlier engagement and better decision-making.

The FCA’s feedback statement makes clear that regulation alone cannot deliver holistic advice, and it’s going to take a lot of collaboration from various stakeholders. The direction of travel is now unmistakable; later life lending is moving into the mainstream, and advice models must evolve accordingly.

If the forthcoming market study can help define a proportionate, commercially viable and consumer-focused vision of holistic advice, it has the potential to reshape later life borrowing for the better – as a planned and informed part of financial life.