Speaking at the Later Life Lending Summit in London, hosted by the Equity Release Council, Paul Saroya, director of Viva Retirement Solutions, said the later life lending sector was a “far cry from where we were in the infancy of this sector”.
“Back then, plans were very inflexible, very rigid and only right for one [type] of situation. That gave us the badge of being the products of last resort, but today, that has dramatically changed, and that badge has been smashed and taken away.
“We have hundreds of different options for many different reasons, and very regularly these days, we’re advising people with regards to their aspirations, with regards to intergenerational wealth, we’re helping to reduce inheritance tax and even do things like paying for care at home.
“The evolution has absolutely happened, but in the last 12-15 months, that’s accelerated further. There have been brave new steps made to bridge the silos that exist between the later life world and the mortgage world with the introduction of hybrid plans, and in the lifetime space, it’s now very much the norm to recommend plans that have heavily discounted interest rates, in terms of the clients making interest payments,” he explained.
Saroya said all of the “evolution and production innovation has widely increased and attracted new lenders, new funders and new advisers to market”, which was “fantastic”.
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“We therefore need to reinforce the need for the ERC standards to evolve as well, to cement the longevity of the industry for the future. Two examples I’d like to give of that. First of all, the charter itself, the four Ts (trust, tailored, thorough and transparent), and I believe they send a very clear message to clients that actually they can see before they engage with the industry how they should be treated and what to expect during the process.
“That should send confident shockwaves through the industries out there, the different silos to people who might be working still today in their silos of the mortgage market, and particularly the wealth market, that they should be referring to the later life sector, or actually step into the market themselves to make sure the property is being taken into consideration properly for a holistic plan,” he said.
He said the adviser standards also send a “clear message” that “good outcomes must prevail”.
“I think that advisers now know that they are expected to go the extra mile for things like vulnerability, to uncover that, to know what to do and to collaborate with the lenders to make sure [of] right outcomes,” Saroya noted.
Mike Batty, L&G Retail’s product and proposition director, agreed that there had been a “lot of product innovation” in the later life lending market, and this, along with Consumer Duty, has led to a “more robust market”.
Regarding the standards, he said while most lenders and advisers have been doing it for years, bringing them together in a new document – the Consumer Charter – would “bring confidence to the market”.
“The growing market is going to need confidence, going to need customers, advisers, funders, lenders and all those participants to have confidence in the way that things are being done. That was the historic[al] challenge that we’ve had with this market previously.
“Going forward, if we’re going to really change things, we’re going to need that confidence. So by setting out these guard rails, these rules that are in place, we’re really building a foundation that we can grow on going forward. I think that’s how we continue to evolve,” he said.
Batty said aligning the later life mortgage market more with the mainstream mortgage market was a “great first step”, but creating “more touch points” and “thinking more holistically” was “just as important”.
FCA wants to ‘work with sector’ to ensure borrowers have options they need
Laura Rodrigues, lead policy adviser at the Financial Conduct Authority (FCA), said the discussion paper due to come out next month on later life lending was “focused on exploring the increasing numbers of people borrowing into later life”.
“We know that retirement income isn’t going to be sufficient for some people for their later time lending needs, so what we want to explore is how we can ensure and how we can work with the sector to ensure we’re ready to support borrowers with the options they need,” she said.
Rodrigues said it was also interested in “innovative solutions” to “increased demand”.
For instance, whether it should be easier for consumers to access housing wealth and how this option could be made more attractive and offer greater value.
“We know that regulation alone can’t do this and meet the demand. That’s why we’re having this discussion paper now, and that’s why we’re opening the debate about the future mortgage market to stimulate that discussion and get feedback from industry as to how there are regulatory barriers or other things we can do differently,” Rodrigues said.
When asked what he would like to see from the FCA, Batty said looking at how to “bring down mortgage silos” and making this a long-term plan would be a good focus.
Charlotte Allen, chief compliance and risk office at Key Group, said “bringing the qualifications together” would be another area, so there’s “only a need for one qualification, regardless of whether it’s later life or residential mortgage planning”.
“I think if we can break that down and everybody be qualified to provide that full spectrum of the mortgage advice, that… would be a great place to be,” she said.
