Mortgage advisers ‘must consider later life lending options’

Mortgage advisers must be prepared to consider full later life lending options to all customers aged 55-plus in order to deliver on Consumer Duty obligations, Key Advice, the UK’s leading equity release adviser, says.

It has called for a fundamental change in the market as part of its response to the Financial Conduct Authority Future of the Mortgage Market Discussion Paper which closes to consultation on 19^th September.

The FCA’s paper* launched in June said: “We think our rules may need to change to enable more holistic advice” and Key believes changes should include a mandatory disclosure requirement for all advisers so that later life customers are clearer on the scope of advice being offered and clear signposting to where they may go for further advice if all later life mortgage options are not being considered – including lifetime mortgages..

It warns that currently mortgage advisers, and some equity release specialists, are failing over-55s customers by not informing them of all their borrowing options and not delivering the good customer outcomes expected under Consumer Duty.

The FCA paper stresses that “mortgage products targeted at older borrowers, whether lifetime, retirement interest‑only (RIO) or other forms of mortgage, are increasingly mainstream.”

But it warns “we risk the market being unable to cope with the needs of future generations of mortgage borrowers.”

Key says that adviser recommendations for over-55s should be based around customer need and not simply facilitating the sale of a particular product type. This becomes increasingly important as customers get older and there are more options available that can offer flexibility in terms of how borrowing is managed given likely changes in circumstances – whether that be related to employment/income or health/lifestyle. 

Too many customers over the age of 55 coming to the end of a fixed term on an existing mortgage are simply rolled over to a similar product – whether that be through product transfer or a re-mortgage.  A tailored later life lending product could be more appropriate to their needs and improve their financial resilience,  and at the very least should be signposted by the incumbent lender and all options fully considered by the mortgage adviser. 

Later life lending options include a wide range of solutions including retirement interest-only (RIO) mortgages and term interest-only mortgages as well as lifetime mortgages with flexible repayment options. 

Charlotte Allen, Chief Risk and Compliance Officer for Key Group, said: “There is a growing need for advisers in the mainstream mortgage market to rethink their approach and the introduction of a mandatory disclosure requirement, for both advisers and lenders dealing with customers over the age of 55, would accelerate that change.

“The FCA should take the lead to ensure that advisers are engaging with older clients and researching a broader range of later life lending products alongside mainstream options – in the same way that equity release specialists should not default to lifetime mortgages without fully exploring affordability and the other products that may be available.

“There is a huge opportunity for mortgage advisers to grow their businesses and improve their customers’ lives by considering the full range of later life lending options with their older customers and ensuring they stay abreast of all the product innovation taking place. 

This can be achieved by expanding their own scope of advice or working with trusted referral partners.”

“The FCA paper highlights that 38% of working‑age people are projected to be under‑saving for retirement. Considered alongside the fact that over 55s are sitting on £3.7 trillion of property wealth means that access to holistic advice that includes consideration of wider  later life lending options  is critical to helping people achieve their financial goals in later life and addressing some of the key challenges facing society.”