It said people may increasingly need to rely on housing wealth later in life for financial security and said lifetime and RIO mortgages could play a greater role.
The regulator said the market still needed to evolve to meet changing consumer needs and its market study would investigate this.
“We will consider how we can help it adapt and, where we find change is needed, we’ll focus on implementing solutions that support competition and innovation, and let consumers easily access products and services [that] meet their needs and provide fair value,” it added.
The FCA will focus on the advice and distribution of lifetime and RIO mortgages, whether new, innovative products should be introduced and how other services, such as sourcing systems or funders, might influence the design and value of products, and competition in the market.
It said it would “consider other means of accessing housing wealth in the context of how consumers understand and compare their options”, including downsizing as an alternative to lifetime and RIO mortgages.
Conversations you need to have with landlords before the Renters’ Rights Act
Sponsored by BM Solutions
Injecting life into the market
The regulator will look at provider entry and growth, saying challengers were important for competition, as without them, providers could be less responsive to customers and less innovative.
The FCA said it had seen “very little successful entry” into the market and showed concern that new entrants and existing lenders faced barriers to growth.
Some stakeholders have told the FCA that the way lifetime mortgages are funded and certain regulatory rules may either hinder growth or deter firms from entering the market.
Further, the FCA will look at consumer understanding and how this impacts planning and decision making. It said holistic advice may resolve understanding, which is why this was being reviewed as part of the Mortgage Rule Review.
It will also examine whether commercial arrangements and relationships create incentives between firms and advisers, and if this incentivises advisers in a way that does not benefit consumers.
The FCA is approaching the market study with an “open mind” and may find that no change is needed or “significant reform” is necessary. Outcomes of the study could include “making, removing, or amending rules”, publishing guidance, suggesting more self-regulation or supervisory action within current rules.
The regulator is accepting views until 17 April and aims to publish an update by the end of this year.
