Later life borrowers risk being significantly underserved in today’s market, says Key Group.
In response to the Financial Conduct Authority’s Future of the Mortgage Market Discussion Paper, the equity release adviser says that silos in mortgage advice reinforced by regulation need to evolve to recognise the benefits of later life lending products and the good consumer outcomes they deliver.
Charlotte Allen, chief risk and compliance officer at Key Group, urged advisers to break down barriers across the market which are blocking effective use of property wealth in later life and not wait for the FCA to act.
Allen said: “The FCA mortgage discussion paper is very welcome but all advisers should be acting now rather than waiting for the FCA to report back.
“Using housing wealth to support retirement will bring substantial benefits to individual consumers, society and the economy.
“But it must be considered in advance of a consumer reaching retirement age if it is to fully support them in effectively planning for an appropriate standard of living in later life.”
Key is encouraging property wealth to be included as standard in government-backed guidance services such as Pension Wise and Money Helper and financial promotion and disclosure rules for regulated mortgages and equity release aimed at later life borrowers to be applied consistently by lenders and intermediaries.
The firm believes regulatory changes should focus on amending Mortgage Conduct of Business rules so that mortgage advice that considers all options for all later life customers is set as standard to improve awareness of and access to the full range of later life lending options.
It also wants to see specific regulatory guidance clarifying regulatory expectations for later life products and the Certificate in Regulated Equity Release required as part of the Certificate in Mortgage Advice and Practice for all mortgage advisers. In addition, Key has also called for CPD to be mandatory to keep up to date with the evolving landscape.
Lastly, enhanced disclosure requirements for advisers and lenders should be introduced to include later life lending and alternative product options while Key says overly prescriptive disclosure requirements need to be lifted to allow firms to adapt communications to suit their target market.
Allen added: “A lack of holistic mortgage advice for later life customers, alongside the absence of property wealth being included in broader financial planning discussions, is holding back consumer access to suitable options, with customer outcomes at risk of being driven by products and adviser types rather than customer need, which discourages innovation in the sector by limiting return on investment.
“These barriers are not reflective of the later life lending products available today which offer a wide range of benefits including the ability to make voluntary repayments and interest rate discounts for committing to repayments.”
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