Brokers should reassess how they approach older borrowers now rather than wait for regulatory direction, according to more2life.
Advisers risk exposing themselves to regulatory scrutiny if they delay reviewing their approach to later life lending while awaiting the outcome of the Financial Conduct Authority’s market study, Dave Harris, chief executive of more2life, has warned.
Harris said that existing Consumer Duty requirements already place a clear obligation on firms to deliver good customer outcomes and avoid foreseeable harm, regardless of any future findings from the regulator.
In practice, this means advisers should be actively considering whether specialist later life lending products may be more appropriate for older borrowers, particularly those seeking to supplement retirement income, support family members, clear debts or fund home improvements without increasing monthly outgoings.
He 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 borrowers aged 55 and over account for around £60bn of annual borrowing, spanning remortgages, product transfers, further advances and house purchase activity.
By contrast, equity release lending totalled £2.6bn last year, suggesting that many brokers are not routinely considering specialist later life products when advising older clients.
He said: “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.”
REGULATORY FOCUS AND MARKET POTENTIAL
Harris welcomed the regulator’s focus on the sector, suggesting that it could help reinforce existing Consumer Duty expectations and drive greater consistency in advice across the market.
He believes that, with an appropriate regulatory framework in place, the UK equity release market could expand significantly, growing from £2.6bn of annual lending to between £9bn and £10bn over the coming years.
He said: “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.”
