The Financial Conduct Authority (FCA) has confirmed it is currently holding “exploratory” talks with firms in the sector in order to improve its understanding of the later life sector, amid concerns that some borrowers may end up on potentially harmful deals.
And while industry figures have been quick to defend the equity release market generally, there have been acknowledgements that questions remain over the best ways to deliver advice to older borrowers.
Segregation not helping
Martin Wade, director of Access Equity Release, argued that one of the greatest attributes of the equity release market is that all sales must be advised, though he admitted that a shortage of advisers who are “qualified, experienced and active in the market” can sometimes lead to negative misconceptions.
Wade continued: “The mortgage market and equity release market are extremely well regulated but they remain too segregated.
“Borrowers over 55 who qualify for equity release should choose an adviser who is both independent and able to directly advise on mortgages and equity release, and the advice process and justification should cover both solutions with pros and cons for each.”
Questions to answer
Caroline Abrahams, charity director at Age UK, said the marketplace for lending to people who are retired is “very different” from the general mortgage market and other forms of lending to those who are still working.
She added: “There are important questions about how to ensure ever older borrowers get the right advice, so it’s good for older people that the FCA is going to look at this area.”
A need for consistent safeguards
Jim Boyd, chief executive officer of the Equity Release Council, noted that equity release and lifetime mortgages were just one part of a broad review into later life lending, which he said “reflects their role in supporting the wider growth of mortgage lending to older consumers in recent years”.
He added that low rates and more flexible deals have made equity release suitable for a growing number of borrowers, backed by safeguards like security of tenure and the no negative equity guarantee.
Boyd continued: “Consumer access to the right advice and support is vital and lifetime mortgages can only be taken out after a detailed process which includes discussing potential alternatives and receiving face-to-face independent legal advice. The same level of protection is not available elsewhere in the market, so we welcome this review.
“With more people living longer, there is an important debate to be had about offering consistent safeguards across the board as well as further product innovation. We look forward to maintaining our close dialogue with the FCA as the market continues to evolve.”