Key Equity Release has welcomed FCA proposals to widen access to later life lending products but says regulatory efforts should focus on breaking down advice silos to ensure older borrowers receive holistic guidance.
The specialist later life lending adviser said proposals contained within the FCA’s CP26/18 consultation are a positive step towards improving access to borrowing options for older customers, particularly through plans to remove the surviving spouse affordability test for Retirement Interest Only (RIO) mortgages.
The consultation, which is open until 28 July, also includes measures aimed at supporting greater access to mortgages for first-time buyers and self-employed borrowers.
However, Key warned that any changes to RIO affordability rules should be carefully sequenced alongside the regulator’s wider work on later life lending and its focus on improving access to holistic advice.
The firm argues that the main challenge facing the sector is not product availability but the low uptake of later life lending products and the persistence of distribution silos that can influence customer outcomes.
According to data cited in the consultation paper, there were 3,002 RIO sales to borrowers aged over 55 during 2025, compared with 26,974 lifetime mortgage sales. In contrast, nearly 300,000 mainstream repayment mortgages and almost 65,000 interest-only mortgages were sold to the same age group.
Key believes these figures demonstrate that later life lending products remain significantly underutilised despite offering features that may suit many older borrowers.
The company is urging participants across the later life lending market to work with trade bodies and provide feedback to the FCA during the consultation process.
Will Hale, chief executive of Key Equity Release, said: “Ensuring that all older customers get to the right outcome requires all later life lending options to be considered and this is where holistic advice is vital.
“RIOs and lifetime mortgages currently make up just 8% of residential mortgage sales to the over 55s. This cannot be right given the features and benefits offered by these products and our understanding of the wants and needs of older customers.
“The product outcome a customer receives remains a lottery based on where they happen to enter the advice ecosystem. It is these distribution challenges that the FCA need to address.”
Hale highlighted innovation within the lifetime mortgage market, pointing to products that allow borrowers to make full, partial or no interest payments, alongside features such as fixed rates for life, security of tenure and no negative equity guarantees.
He said: “Innovation in the lifetime mortgages space now sees products that allow interest to be served in full, in part or not at all. Lifetime mortgages offering a fixed rate for life come with embedded protections that are not available with RIOs or mainstream mortgages such as certainty of tenure and a no negative equity guarantee.
“Assessed side by side with other later life lending products as part of a comprehensive advice process, modern lifetime mortgages, perhaps with interest payments being made to limit equity erosion, can deliver the most suitable outcome in many situations.
“RIOs and mainstream mortgages may offer a lower cost of borrowing but this should be just one consideration in the advice process and eligibility on the basis of affordability shouldn’t be confused for suitability when there are alternative options available.”
“This consultation paper is another clear signal that later life lending is moving firmly from niche to norm”
Hale said the proposed changes could be particularly beneficial for borrowers whose age and funding requirements place them outside the loan-to-value limits typically available through lifetime mortgages.
He said: “Where the proposed RIO changes under CP 26/18 should make a significant difference is for those customers whose age and borrowing requirement puts them beyond lifetime mortgage LTV constraints.
“Therefore, this is a positive move from the FCA as long as it is accompanied by a commitment to ensure that all products are considered for all customers over the age of 55.
“It is very welcome that in this consultation paper the FCA again acknowledges that many are under-saving for retirement and that housing wealth needs to play a central role in supporting people’s financial goals in later life.
“Furthermore, by outlining how follow-on products from interest-only mortgages such as RIOs and lifetime mortgages might be considered credible repayment strategies, the regulator is expressing an acceptance that that people will need to borrow into later life and that paying-off mortgage debt is not a realistic, or indeed optimal, objective for many.”
Hale added that the consultation represented further evidence of later life lending becoming an increasingly mainstream part of the mortgage market.
He said: “This consultation paper is another clear signal that later life lending is moving firmly from niche to norm and mainstream mortgage advisers, irrespective of qualifications or scope of proposition, cannot ignore products such as RIOs or lifetime mortgages if good outcomes for customers are to be achieved.”
