The regulator said that lifetime mortgages and home reversion plans are regulated as two separate niche sectors, but that the market sees these as substitutable products.
As a result, the regulator is proposing to create a single equity release market to reflect this.
“This will mean that, under our disclosure proposals, intermediaries must explain to consumers that their service is restricted if they only offer one of these product types,” said the FSA.
It added that firms would not have to change their current permissions, however this will have an impact on how they describe the scope of their service to consumers.
The FSA has proposed to replace service labels such as ‘independent,’ ‘limited,’ ‘single,’ or ‘whole of market,’ to much simpler and readily understandable labels such as ‘independent’ and ‘restricted,’ in line with the approach adopted by the Retail Distribution Review (RDR).
“We thought that aligning with the RDR approach would make sense for intermediaries and would be less confusing for consumers.”
The FSA added: “Treating equity release as a single market will have the effect that intermediaries offering only lifetime mortgages or only home reversion plans will need to explain to consumers that their service is limited and describe the limitation in terms of the wider equity release market.”
