Later life borrowers are in danger of being “significantly underserved” unless regulation evolves to reflect the role of housing wealth in retirement planning, according to Key Group.
Charlotte Allen, chief risk and compliance officer at the equity release specialist, has urged advisers not to wait for the Financial Conduct Authority (FCA) to act following the regulator’s Future of the Mortgage Market Discussion Paper, which closed to consultation last week.
She said the existing regulatory framework reinforces silos in mortgage advice, preventing consumers from accessing the full benefits of later life lending products.
REGULATORY CHANGE CALLED FOR
In its submission to the FCA, Key argued that property wealth should be included as standard in government-backed guidance services such as Pension Wise and Money Helper. It also called for consistent application of financial promotion and disclosure rules across both regulated mortgages and equity release aimed at older borrowers.
The group wants Mortgage Conduct of Business (MCOB) rules amended so that advisers are required to consider the full range of later life lending options. It has also called for specific regulatory guidance setting out expectations for later life products.
Key further proposed that the Certificate in Regulated Equity Release (CeRER) be incorporated into the Certificate in Mortgage Advice and Practice (CeMAP), ensuring that all mortgage advisers are qualified to give advice on equity release, with continuing professional development made mandatory.
Allen said enhanced disclosure requirements were needed to ensure that later life lending and alternative product options are consistently presented, but added that overly prescriptive rules should be relaxed to allow communications to be tailored to different customer segments.
BARRIERS TO CONSUMER OUTCOMES
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.”
She added that the absence of property wealth from wider financial planning, coupled with a lack of holistic advice for later life customers, risked leaving outcomes driven by product availability and adviser type rather than consumer need.
Allen concluded that these barriers were not reflective of the products now available, which offer features such as voluntary repayments and discounts for committing to repayment plans.
