Its report, Retirement borrowing: reality, perceptions, projections and potential lays out a raft of action points for regulators, government and the industry to help service older borrowers.
The lender trade body outlined the complexity of the debate, calling for all stakeholders from equity release providers, the regulator, lenders, financial advisers, think tanks and compliance experts among others to ‘keep this momentum going.’
The call to action for the CML and lenders includes creating a ‘seamless advice framework’ in partnership with financial advisers, including better ‘hand off arrangements’ between brokers with different specialisms.
The CML also recommended lenders closely monitor whether the pension freedoms move has sparked interest-only mortgage repayments and urges lenders to innovate on lending into retirement for all age brackets and explore the potential for a flexible capital repayment and interest-only roll up product for the 50 to 75 years age group.
It asks the Financial Conduct Authority to look at how regulation could encourage a more holistic approach to mortgage, lifetime and investment advice in the round, which it said, is what many older borrowers really need.
The trade body said the different reasons for borrowing should also be reflected in sales channels, where health may be more important than age in determining the quality and suitability of products and the sales advice that accompanies them.
The trade body urged the regulator to work with it to provide a standard definition of retirement. It also suggested changes to some of the MCOB rules would allow as an example, a lifetime mortgage to be an acceptable repayment strategy for interest-only mortgages.
The research recommended the Prudential Regulatory Authority review any unintended consequences created by its capital adequacy rules.
It said: “We ask the Prudential Regulatory Authority to consider ensuring that its work on defining acceptable models for Solvency II, involving requirements for matching assets, does not lead to an unintended consequence of withdrawal of products or failure to introduce products that would benefit consumers.”
It flagged the current risk hedging ‘technical disincentives’ acting as barriers to the development of new retirement lending products. Its specific concern stems from the newer set of accounting standards laid out in International Financial Reporting Standards 9.
Considerations the CML outlines for the government include introducing tax relief on professional ‘at retirement’ advice to encourage take up. It also flags the importance of a joined-up, multi-disciplinary approach to advice for older borrowers, including encouraging Pension Wise to include substantial questioning about housing debt.
Finally, it suggested the Treasury could look abroad to see how other countries have addressed these issues, including state backed guarantees similar to those used in the US and South Korea.
CML director general Paul Smee, (pictured) said: “There is no silver bullet to address the complex issues involved in the housing and financial needs of older borrowers, but it is hugely significant that so many willing participants from across the mortgage industry and beyond are now collaborating to try to put this jigsaw together.
“We should push forward on the more straightforward issues – such as improving advice hand-offs, using the Pension Wise trigger point to address housing and debt issues, focusing on good product design, and a regulatory focus on avoiding negative unintended consequences on retirement borrowing.
“A truly holistic approach will take longer to emerge. But there is enthusiasm to work together to address the issues. We must maintain this momentum. Through collaboration we should aim for consistently good advice, sensible housing solutions, and products that offer the financial outcomes that many older consumers are looking for, without disproportionate risk to lenders and advisers.”
Last month, the CML published research outlining the demand for borrowing in retirement.
