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ERC wants FCA clarity over retirement interest-only loans

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The Equity Release Council has called for more clarity from the FCA on proposals to bring back retirement interest-only mortgages.

Earlier this year the regulator announced a consultation paper on the issue.

It says it has found a regulatory barrier to helping older borrowers with maturing interest-only mortgages and those wanting to release equity from homes without interest roll-up.

Responding to the consultation, Equity Release Council chairman David Burrowes says: “We support efforts to provide a greater choice of flexible product options that are in the best interest of older consumers and welcome the fact the FCA is actively considering the issue of interest-only mortgages reaching maturity, as many consumers will require solutions to repay debts.

“However, as the market grows it is of the upmost importance to ensure that safeguards are in place, that consumers are protected and are offered the necessary advice.”

Burrowes adds that the FCA’s proposal is “far from implementation ready”.

He says the ERC would like to see FCA workshops dedicated to detailed policy discussion.

He adds: “We would also like to see the development of ‘what-if?’ scenarios to test the feasibility of retirement interest-only mortgages, particularly in relation to future affordability as circumstances change. This will establish whether the proposed product structure will indeed help meet the policy challenge it is intended to resolve.

“Given the potential risks associated with retirement interest-only mortgages it is important for the regulators to work alongside industry and political stakeholders to ensure the best possible outcomes for consumers planning financially for later life.”

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