View more on these topics

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.”

Recommended

FCA logo glass 620x430

FCA issues insurance review and market study

The FCA has published a review and market study on the UK retail general insurance market, the former focussing on home insurance. The review interrogates the fact that, unlike the motor insurance sector, where price competition has led to a lack of overall underwriting profitability, home insurers have “generally been profitable at an industry level […]

FCA logo new 3 620x430

FCA publishes fair pricing paper

The Financial Conduct Authority has launched a public debate on the fairness of certain pricing practices in financial services, including the mortgage market. The regulator is asking for comments on its published discussion paper, Fair Pricing In Financial Services, to be submitted by 31 January 2019. The FCA is focusing the debate two key pricing […]

FCA logo glass 3 620x430

FCA announces redress programme for Mortgage Matters customers

The FCA reports that a number of customers of The Mortgage Matters Partnership, a mortgage and insurance intermediary that is no longer trading, were given unsuitable mortgage advice and that, consequently, a customer contact and redress programme is now underway. Furthermore, the regulator states that the Financial Ombudsman Service has looked into a number of […]

Handcuffs-700x450.jpg

Citizens Advice launches ‘super-complaint’ over longstanding customer treatment

Charity network Citizens Advice has lodged a ‘super-complaint’ with the Competition and Markets Authority as new research shows that longstanding customers are having to pay an extra £4bn a year. Citizens Advice looked across markets for savings and mortgages, as well as three other “essential” markets including home insurance, mobile and broadband, finding that British […]

Could Proptech revolutionise construction?

By Rebecca Murphy, relationship manager, LendInvest  The construction sector offers enormous potential when considering the implication emerging technologies could have on both existing processes and final results. While the completion of an entirely 3D-printed office block may be ‘sexier’ news than a new smart toolbelt that tracks the wearer’s location on site, each area of development […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • 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?