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Ex-regulator Blackwell laments ‘poor-value’ of gilt-linked lifetime products

  • 29/09/2021
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Ex-regulator Blackwell laments ‘poor-value’ of gilt-linked lifetime products
Lynda Blackwell, ex-Financial Conduct Authority (FCA) mortgage sector manager and consultant has criticised the poor value offered by gilt-linked lifetime mortgages potentially trapping up to 300,000 customers.


She said there were many ‘better value’ products on the market today, but ‘it remains to be seen’ whether the regulator will step up and intervene on behalf of these customers as it was forced to before in the mainstream mortgage market.

In an opinion piece in the Daily Mail responding to a case study covered by Samantha Partington, contributing editor of Mortgage Solutions, Blackwell (pictured) referred to the case of a Prudential lifetime mortgage customer, Jane Horton, who took out a gilt-linked lifetime mortgage worth £384,000 in 2008, to be hit by a £1m bill to clear the debt 13 years later.

The deal from Prudential which charged 6.87 per cent per month accrued £27,000 of interest in the first year and carried a £96,000 penalty for early repayment. The mortgage adviser took £7,120 in commission fees for setting up the deal.

Blackwell said: “The equity release sector talks a lot about how it has changed for the better, offering customers today fairer, more flexible and better-value products. But stories like that of Jane Horton shine a light on the poor-value products offered in the past, in which many thousands of customers remain trapped.”

She said the average borrower might struggle to understand the risks and costs associated with gilt-linked equity release early repayment charges.

“It’s a huge gamble for the borrower — and the adviser, too. They need to understand what’s likely to happen to interest rates and gilt yields and be prepared for the risk that it won’t necessarily end well,” she warned.

“It is a product much more suited to high-net-worth individuals or sophisticated investors, who can afford the downside, not older, potentially more vulnerable customers, needing to manage their finances carefully into later life.”

Blackwell added that quality of advice is key but said the regulator’s report into the sector’s advice and sales process does not make for ‘encouraging reading.’

“In too many cases, the FCA found that the advice given was not in the best interests of the consumer,” she said.

An Equity Release Council spokesperson said: “Lifetime mortgages are typically designed as long-term commitments that give customers lifelong guarantees and protection against interest rate rises, negative equity and the risk of repossession – typically until they pass away or move into permanent care. Regulated financial and legal advice make the benefits and costs of these protections very clear before anyone commits to taking out a plan.

“Today’s low interest rates and varied product range provide more options for existing customers seeking to switch to another plan. Initial adviser consultations can often be free of charge, and many advisers proactively contact existing clients with this in mind.”


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