Trade bodies also acknowledged that retirement interest-only (RIO) products were only likely to produce a “very low” volume of customers and that there needs to be more innovation in the laterlife market.
In a panel debate at the Financial Services Expo discussing laterlife lending, UK Finance director of mortgages Jackie Bennett (pictured) noted that unlocking equity in housing was not a new debate.
But she cautioned that governments were often over-ambitious in believing it could solve many issues.
“You can’t keep looking at property as the gift that keeps on giving,” she said.
“The government could look at some options here that could help customers. So for example, maybe not charging customers stamp duty on downsizing – it’s an idea that’s been talked about before.
“There are ways in which consumer choice can help to be exercised, but ultimately it is the consumer’s choice what they do,” she added.
Lack of innovation
BSA head of mortgage policy Paul Broadhead suggested the laterlife lending market was at the start of its journey and that more needed to be done by lenders.
He noted that retirement interest-only is seen as mainstream while lifetime mortgages have different regulations, qualifications and advice, and that these products needed to be brought closer together.
“I don’t think we’ve seen a great deal of innovation in the retirement lending space for quite some years,” Broadhead said.
“Equity release has been a valuable product and grown hugely. But it’s clear now that something needs to change.
“RIO is a welcome addition, but it will be very low volume starting from a very low base. We have six building societies already active with three more committed to coming forward in the next year or so,” he added.
Helpful bridge product
IMLA executive director Kate Davies agreed that RIO was unlikely to have a significant impact on the mortgage or laterlife lending market.
“Our view in early discussions was that it would be a relatively small number of customers who would be using it as a relatively short-term bridge,” she said.
“It may be for people who have stopped full-time working but are still part-time working while waiting for an occupational or state pension to kick in.
“It may be helpful for people who want to stay in their property but have plans to downsize at a later date,” she added.