In its Mortgages Market Study published earlier this week, the Financial Conduct Authority revealed which areas of the market would be investigated to establish if they were working in a way which did not hamper competition. The funding of mortgages, said the FCA, fell outside the scope of its investigation.
Alice Watson (pictured), head of marketing, Retirement Advantage, said complex capital requirement regulations, overseen by the Prudential Regulation Authority (PRA), would deter new lenders from entering the market and existing ones from expanding their ranges.
Under the rules of a new European directive, Solvency II, lenders are required to hold more capital against equity release loans. Watson said the rules, which were mid-way through implementation, were having an a negative impact on all providers’ funding and highlighted the disjointed relationship which existed between the FCA and the PRA.
“The rules are complex and the classifications are having an effect on the whole market,” said Watson. “Coupled with Brexit, when capital levels may have dipped a little for some providers, this is having a long-term impact on the market.”
Watson added: “The FCA has been a great supporter of equity release this year but the PRA’s treatment of capital requirements for the sector shows the two bodies are conflicted.”
Nigel Waterson, chairman of the Equity Release Council, agreed with Watson that funding should be included in the FCA’s scope of investigation and, along with Retirement Advantage, would be recommending that the terms of the review were widened to include this part of the market.
He added: “There is a potential disconnect between the two regulators which is worrying. The FCA is very supportive while the PRA is pulling in the opposite direction.
“We are heavily engaged with the PRA to make sure they do not gold plate the directive.”