Brokers should review their approach to advising older borrowers now, rather than waiting for the outcome of the Financial Conduct Authority’s (FCA) later life lending market study, according to Dave Harris, Chief Executive of more2life.
Harris said that while the FCA’s later life market review may provide further clarity in due course, Consumer Duty already places a clear obligation on firms to deliver good outcomes for customers and avoid foreseeable harm.
In practice, that means actively considering whether specialist later life lending products could better meet older borrowers’ needs, particularly where they are looking to bolster their retirement funds, financially support loved ones, clear debts or fund home improvements without increasing their monthly commitments.
Harris said: “Firms are required to avoid foreseeable harm and deliver good outcomes for customers. That principle already exists in regulation today – it does not depend on the outcome of the FCA’s review.
“That means advisers who wait for the outcome of the later life market study may be inadvertently opening themselves up to regulatory risk. Advisers should already be confident they are considering the full range of options available, including specialist later life lending products, such as lifetime mortgages, where they may lead to a better outcome for the client.”
Harris estimates that that borrowers aged 55 and over account for approximately £60bn of annual borrowing, including remortgages, product transfers, further advances and house purchase lending.
By comparison, total equity release lending was £2.6bn last year. This suggests that most brokers are not considering specialist later life products when they speak to older borrowers, despite the fact they could be a better option for those already in or entering retirement.
Harris added: “In many cases, the advice process is still structured around a default outcome: the client’s mortgage deal ends, they either take out a product transfer or remortgage to another mainstream mortgage lender without a broader discussion about whether that is the most suitable solution for the borrower’s individual circumstances.
“The issue is not access to advice; it is the consistency with which specialist lending later life lending products are being considered alongside more mainstream options.”
Harris welcomed the FCA’s focus on later life lending, saying it could help reinforce existing Consumer Duty expectations and support a more consistent approach to later life lending advice across the market.
He believes, with the right regulatory framework in place, the UK’s equity release market could grow four-fold, from £2.6bn of annual lending now to around £9-10bn, over the coming years.
Harris added: “The direction of travel is already clear, and the regulator knows that this part of the market could and should be working better. On top of that, people are not only living longer, but many of them are facing uncertain retirements due to pension shortfalls and, more generally, the rapid increase in the cost of living over the past few years."
“Therefore, more and more people are going to have to tap into their property wealth to fund their retirements. That’s why it’s important we get this right and ensure that the advice journey takes account of these realities.”
