FCA says older borrowers face advice and product gap

Home-House-Money-Property-700x450.jpg

The FCA says many older mortgage borrowers struggle to get complete advice and cannot access a wide choice of products. 

The regulator made the statement in an ‘occasional paper’, published today. 

It suggests firms should take older borrowers into account more with their policies and proposition. 

It adds that mortgage companies should also plan for consumer needs at different point in their lives. 

Finally, the FCA recommends firms should be “considering potential innovation in product features or terms and supporting services to accommodate specific life events.” 

However, the FCA says these issues are hard for individual firms to tackle, and also praised the mortgage trade bodies’ own research and “significant efforts” towards helping older borrowers. 

Choice 

The FCA says older borrowers often do not have enough choice of mortgage products and that lenders have a “limited appetite” for the loans. 

It says: “This could be due to fewer local branches, fewer products offered by high street brands that meet their needs, or restrictions in lending criteria to older consumers.” 

Lenders may also fear regulatory punishment when lending to older consumers. 

This leads to issues with accessing suitable mortgage products, the FCA says. 

The regulator also says its own rules may not help older borrowers. 

There are also some regulatory barriers to innovation, such as the withdrawal of retirement interest-only mortgages, but that it is looking to bring these back. 

Brokers 

The FCA also says brokers have problems navigating products for older borrowers. 

The regulator says “opaque or nuanced” criteria and complex affordability assessments make it hard for brokers to compare options. 

This can lead to brokers only recommending a small number of products they are familiar with. 

Lenders 

The regulator also says lenders may not be clearly publishing information about upper age limits or acceptable sources of retirement income on their websites or literature. 

The FCA says it is neutral about upper age limits in mortgage lending, though notes many lenders have increased this or removed it. 

 

But it adds: “Although we have noted some progress in this area, consumer groups, firms and trade bodies report that increases to upper age limits will not be sufficient to facilitate lending to older borrowers. 

 

“Firms may be unnecessarily limiting themselves, and older borrowers, by having rigid policies or systems and controls that are unable to consider individual circumstances, potentially resulting in unintended exclusion of credit-worthy consumers in the target market.” 

Minefield 

The regulator also reassured mortgage firms and trade bodies who feel that lending to older borrowers is a minefield and that the regulator may punish them for making mistakes. 

The occasional paper says: “Our MCOB rules do not aim to discourage firms from lending to older borrowers, as long as they are credit-worthy. Decisions about lending strategy, identification of an appropriate target market, and application of any specific restrictions in lending policies are left to the discretion of individual firms.” 

The regulator adds that it knows defining what ‘income’ is can be complicated for lenders catering to older borrowers. 

It says lenders should take a common sense approach to this. 

The FCA also says it will review its Handbook to make sure it is easy for firms to interpret, but that it needs to wait for Brexit first. 

Recommended

Home-Houses-Different-Mortgage-Rent-700.jpg

Positive Lending to distribute Marsden BS’s older borrower loans

  Positive Lending has added Marsden Building Society’s older borrower products to its lending portfolio. Intermediaries who work with Positive Lending will get access to Marsden’s older borrower range which offers a conventional mortgage option for clients aged more than 55. The society has just recently launched 28 new older borrower products. The loans are […]

Old-Couple-Elderly-Pension-Pensioners-700.jpg

More joined up approach on advice for older borrowers needed, says CML

A more joined up approach to advice for older borrowers is needed to narrow the gap between mainstream lifetime mortgage advice ‘silos’ according to the Council of Mortgage Lenders. The report follows research carried out in conjunction with the Building Societies Association, which highlights that UK households headed by individuals aged 55 or over form […]

Real-Estate-Agent-House-For-Sale-London-700.jpg

Head 2 Head: Should lenders have age caps for residential mortgages?

YES Gev Lynott, chief executive, Mansfield Building Society Since the Mortgage Market Review more stringency has been applied in assessing the financial affordability of older borrowers. But should this have led to the tightening of age restrictions that we’ve seen from some lenders over recent years? Although recently some progress has been made in product […]

Question-Marks-700.jpg
6

Brokers defend fees after ‘double-dipping’ claims

Brokers have refuted claims they overcharge customers by charging them a fee while also taking a commission from lenders. The issue has been thrust back into the spotlight by One 77 Mortgages, which yesterday said borrowers are wasting £370m a year on unnecessary mortgage advice fee to brokers. One 77 Mortgages managing director Alastair McKee […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • George Nicola 22nd September 2017 at 11:04 am

    ‘Common sense approach’?
    Well, I await that with interest!

    It will be interesting to see how ‘vulnerable clients’ will be accommodated, changing financial situations accommodated, etc. Let’s face it. there is no chance that a funder will be able to design a product that can take a person from being a first-time buyer to when they are beyond retirement age. What is needed is a greater appreciation of the solutions that can be provided by different providers, with advise from the suitably qualified and knowledgeable advisers working in conjunctions with other specialists.

    There needs to be greater co-operation between the financial adviser, lending adviser, legal adviser, care adviser, etc. Each adviser should contribute to the discussion, much in the way that a GP will work with the chemist, optician, chiropodist, hospital, etc.

  • Carl McGovern 21st September 2017 at 3:13 pm

    The situation regarding the like of products and lenders, who accommodate older borrowers, has been around for far too long. Is lifetime lenders are prepared to allow a mortgage to be discharged on second death, why not traditional lenders. With many people aged 60 and over retiring with large pensions, why should these people have a cut off age Being prudent and perhaps ensuring that in a joint borrowers case, the Income in first death supports the Mortgage, why does a maximum age at expiry exists?

    Although some of the bigger lenders have improved in this area, I personally think there is a long way to go and I am glad that the FCA are on to it.