Dave Harris, Chief Executive of more2life, has called on the Financial Conduct Authority (FCA) to make it mandatory to signpost all available products to older borrowers, including equity release, to improve consumer outcomes.
The call comes after the FCA’s Emad Aladhal described specialist later life lending products as a possible “fourth pillar” in retirement, alongside state, workplace and private pensions, and urged the industry to step up and reach its potential.
Harris believes it is vital that all older borrowers, whether they visit an independent broker or speak to someone working for a bank or building society, hear about all of the options open to them, including equity release.
However, FCA data suggests that is not happening at present. While the sector has been given this endorsement from the regulator, FCA data shows that lifetime mortgages and retirement interest-only loans accounted for just 7.6% of loans to over-55s last year, with the rest rolling onto a product transfer or remortgaging to another lender.
The case for action is underpinned by new research from Fairer Finance, which found that 7 million homeowner households aged 55-79 will have a retirement income below the Pensions UK moderate standard (£31,700 a year for a single person and £43,900 for a couple, net of tax) – equating to 46% of homeowner households in that age bracket.
In March, the FCA launched its much-anticipated later life lending study to examine how the sector can play a bigger role in supporting consumers’ retirement provision.
“Consumer Duty already requires firms to consider the full range of options and avoid foreseeable harm. But the data shows that duty isn’t translating into consistent practice.
Too many older borrowers reach the end of their fixed rate and roll onto a product transfer or a remortgage without hearing about the other options available.
This isn’t only an advice market problem. Mainstream lenders sit at the heart of the customer journey too, and they carry just as much responsibility to point people towards the right pathway.
Mandating signposting and proper triage – with referral on where a lender doesn’t offer these products itself – would ensure the end customer walks away with a product that suits their needs.”
Dave Harris, Chief Executive of more2life
Fairer Finance’s research, which was published last week, found that while 70% of homeowners aged 55-79 are aware of equity release, only 13% have gone as far as considering it.
Harris 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 at least £9-10bn over the coming years.
Harris added: “People are not only living longer, but many of them are facing uncertain retirements due to pension shortfalls and the rapid increase in the cost of living over recent 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 older borrowers are hearing about all of the options available.
“The regulator is now treating housing equity as a structural part of retirement planning. The next step is making sure that’s reflected in reality.”
