The ongoing evolution in later life lending products is responding to customer needs and demand from advisers, Key Advice, the UK’s leading equity release adviser, says.
The FCA’s recent Mortgage Market Discussion Paper, which closes to consultation on 19thSeptember, highlighted how the regulator does not want to be “creating a barrier to innovation” and wants to ensure that “firms feel confident when launching new offerings”.
Key Advice believes new products such as Omni from more2life underline how the later life lending market is responding to demand from advisers and their clients who have been unable to access later life lending products.
Using Omni, advisers can now offer LTVs (Loan-to-Value ratios) up to 55.3% – a number of percentage points higher than what was previously available in the market – and the product is more inclusive with applications allowed up to age 89 and for unusual properties, including complex cases which were previously rejected.
Ongoing product innovation highlights how important comprehensive conversations with clients are for advisers, across mainstream mortgage advisers, wealth managers and equity release specialists, and why considering all options including later life lending can deliver good outcomes, Key says.
The increasing flexibility of lifetime mortgages, which includes shorter Early Redemption Charge (ERC) periods – it is six years on Omni – and the option to make ERC-free repayments to help control the cost of borrowing, can make these products suitable for a significant number of customers, Key adds. Products still include the no negative equity guarantee so estates do not face any issues with loans exceeding the value of the property – which can be an important benefit when rates are higher than what customers and advisers became accustomed to in the period preceding the mini Budget in October 2022.
Rachel East, Senior Director at Key Advice, said: “Lifetime mortgage lenders are increasingly responding to what advisers are telling them their customers need and the expansion of LTVs and broader lending criteria are top of the list.
We have to turn away many customers who have a borrowing requirement above the maximum available, and for whom affordability barriers mean mainstream products such as RIOs and TIOs are unavailable, so innovation is helping later life lending advisers to support more older borrowers achieve good outcomes.
It is important that mainstream mortgage advisers and other financial advisers are aware of the innovation in the later life lending sector so they can identify customers for whom these options may be appropriate and potentially refer them to a specialist.
The FCA has made it clear that the later life lending market needs to evolve so it can help more people and lenders are responding with the innovation that delivers that. Irrespective of the scope of the advice they offer, in order to meet Consumer Duty obligations, advisers need to be having comprehensive conversations with customers on all of their options and have trusted referral relationships in place in order to deliver good outcomes.”
