FCA investigating product access for older borrowers


The FCA is seeking to find out whether there are any barriers stopping older people from accessing financial services products – including mortgages.

The regulator published a discussion paper today, which includes a consultation.

The FCA is asking:

  • Do you have any views on the ideas set out in this Discussion Paper and can you suggest areas of focus that would improve financial markets for older consumers?
  • Are there specific products, services or distribution channels that are particularly associated with poor outcomes for older people?
  • What is the role of industry and other stakeholders (collectively as a market or at an individual firm level) in addressing the issues identified?
  • Do you have any evidence of effective approaches to meeting the needs of older people that you have already developed and tested, or that you have observed in other markets (UK and international)?
  • Do you have any evidence of regulatory barriers that prevent effective markets for older people?

The FCA will use what it finds to draw up its 2017 strategy on the elderly and financial services.

This strategy will make recommendations about how the regulator can “improve outcomes” for older people, including possible regulatory changes.

The FCA paper includes written opinion pieces from a range of financial services firms.

Financial Services Consumer Panel chairman Sue Lewis says that the maximum age limit for many mortgages is trapping some lenders on bad deals.

She says: “Without access to traditional mortgages, older people may be forced into the
alternative market of equity release.

“While most equity release schemes are classified as mortgages, their terms and conditions are wholly different from more traditional and familiar products, with much higher charges and interest rates prevalent.

“Providers justify these higher charges as the only way of both making a profit and supplying features such as a ‘no negative equity guarantee’. The market is neither competitive nor innovative, with three main providers and three main adviser networks pricing out smaller more innovative players.”

Building Societies Association head of mortgage policy Paul Broadhead says that there are two main areas the trade body recommends for its members: making sure older customers have good information to make financial decisions and considering hiring an ‘older persons champion’ to overhaul lenders to better serve older customers.

Both areas were flagged up in the BSA’s November interim report, Lending into Retirement.

He says: “We need to assess the regulatory regime alongside the demographic changes that we face to ensure it remains fit for purpose.

“The conversation needs to move on from what firms feel regulation may prevent. Instead
regulators and industry alike should focus on the potential risks with lending to older
borrowers and how firms can best mitigate them.”

Council of Mortgage Lenders head of policy June Deasy says the CML is monitoring evidence around how pension freedoms and the mortgage market interact, including the ways in which pensions pots are being used for mortgage payment purposes.

She says: “At present, few advisers cover residential and lifetime mortgages and investment
advice. Advice is segmented, due to different regulatory regimes, different types of
advisor; and different product heritage. It would help if the transition for consumers
between different segments of advice was smoother.

“Mortgage advice for older borrowers cannot be given in isolation but has to touch on pension income; provision for long term care; and the impacts on benefits and inheritance.”

Deasy says that lending into retirement is another issue for older borrowers.

She says: “The regulatory framework for lending into retirement should be such that lenders do
not feel apprehensive about lending to borrowers beyond retirement age, because
regulatory attitudes and constraints are well and consistently understood; and the
challenges for lenders in evaluating whether borrowers have – and will continue to
have -the necessary income to service a loan are appreciated.”