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FCA’s Woolard warns of “unintended consequences” in later life lending

FCA executive director of strategy and competition Christopher Woolard has given a speech at the UK Finance annual mortgage conference in which he highlighted the rise of relatively younger borrowers in the later life lending sector.

Coming on the back of the interim findings of the Mortgage Market Study, which were released in May of this year, Woolard said that the FCA had found a market that is “largely working well, but one that could be improved.”

Specifically, Woolard noted three concerns: mortgage switching (with the FCA finding that around a quarter of customers don’t switch products within six months of moving to a reversion rate); ensuring that customers know what mortgages they qualify for; later life lending; and ‘mortgage prisoners’.

Regarding later life lending, Woolard brought attention to the fact that there is a gradual upwards trend in the 56-60 age group opting for lifetime mortgages, to the point where they now make up 7 per cent of all sales in this product category.

Because of the way compound interest works, generally doubling debt every 14 years, the younger the borrower, the greater the risk. “We must be especially alive to this,” Woolard said.

“As a regulator,” he added, “we are squarely behind the development of innovative products that meet the changing needs of customers…  but to ensure that innovation lives up to its promise – and doesn’t fall into the trap of unintended consequences – we are looking to firms to use their common sense when lending, and make sure they’re matching the right products to the right consumers.”

Woolard also brought up the fact that there are three peaks in the maturity of interest-only mortgages (which currently make up nearly one in five existing mortgages)– now, in 2027/28, and in 2032, “which post a greater risk of shortfalls.”

He said that it was vital that lenders properly engage with customers who speak to lenders early about the options they have in these cases, and that the FCA is “pleased to see lenders making positive efforts in this regard.”

Woolard also spoke about the ‘mortgage prisoner’ issue, which describes the estimated 140,000 mortgage borrowers who are unable to move to a more suitable product because either their lender has closed its books or through being with firms that are not authorised to offer new products.

In rather stark terms, he said that “this casts a long shadow, beyond that of the mortgage sector.”

When injustice is felt in the mortgage market, Woolard concluded, because of the sector’s importance in people’s lives, it can inform a view in the long term.

Understanding this and making people trust the market therefore “isn’t just an issue of fairness, but of the efficiency in the market.”


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  • David Farrell 6th November 2018 at 2:17 pm

    I agree with his comments regarding later life lend g too soon and other options should be more suitable and of course the damage mortgage prisoners causes. Ala the TV expose. but aren’t lenders merely reacting to the permission they have from the fca ie if they fca won’t allow the lenders to lend and new lenders have to meet affordability guidelines and stress testing etc etc all laid down by the fca isn’t this just complaining about the regulations in the market place that are stopping people lend sensibly….. but who makes the regulations?