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FCA under fire from ex-regulator for siloed rules on Rios and equity release

  • 08/07/2019
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FCA under fire from ex-regulator for siloed rules on Rios and equity release
The Financial Conduct Authority (FCA) has been criticised by its former policy manager for a siloed mentality on regulating retirement interest-only mortgages (Rios) and equity release.


Lynda Blackwell urged the FCA to think again about its approach to Rios versus equity release during a panel session at the National Later Life Adviser Conference 2019 last week, reported FT Adviser.

Rios are categorised within the regulator’s mainstream mortgage rules meaning that advice is not required and that the borrower must show only that they can afford the interest payments.

Equity release is subject to stricter rules requiring that advice comes from a qualified adviser. The Equity Release Council, which counts many advisers among its members, further mandates independent legal advice.

Blackwell reportedly claimed that the big banks had lobbied hard for a residential approach to regulating Rios and that the FCA wanted to help customers whose interest-only mortgage deals had ended. 

She said that the FCA’s “silo approach” had resulted in a “disconnect” between the rules on Rios and those on equity release.

Will Hale, chief executive of Key, added that the FCA had failed to keep up with the latest developments in equity release product design, such as the flexibility to make interest payments or pay off the loan in chunks.

“The FCA hasn’t truly embraced the changes in the industry around product design and flexibility and therefore we need to educate the regulator on this,” Hale said.

The FCA moved Rios out of the lifetime mortgages category in March 2018 in a bid to encourage uptake.

The FCA declined to comment on the story when contacted by Mortgage Solutions.

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