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FCA to investigate whether regulation is holding back equity release

The FCA says it will investigate whether regulation is holding back the equity release market in the UK.

At an FCA-organised conference in London today, director of strategy and competition Christopher Woolard called the UK and European Union equity release markets “relative minnows” compared to the US. He cited EU calculations that 13 member states had recognised equity release markets but that these accounted for just 0.1 per cent of total mortgage lending.

Speaking during a journalists’ briefing, acting director of supervision – retail and authorisations Linda Woodall said the FCA would investigate whether regulation was holding back growth in the sector.

She said: “We need to look [at equity release] because in comparison to other countries equity release has progressed pretty slowly in this country. That doesn’t mean we should take off all of the constraints.

“It is a product we think has a place but anybody considering such a move should do so advisedly because it can be expensive.”

She added that the regulator wanted to ask the industry whether there are possible alternatives to equity release that could be offered to customers instead.

She said: “I don’t know whether we can say that, at this stage, it means loosening [restrictions on the sector] but it means we have to look at it but also to stimulate consideration of other products that can maybe come before equity release that maybe do not exist at this time; products that flex with borrowers’ needs as they get older.”

In the first half of the year, equity release providers lent £710m to customers – a half-yearly record. However, to put this into context, any one of the largest 15 lenders in the UK lent either the same or more individually than the equity release sector did as a whole in H1.

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  • Corby Macdonald 8th September 2015 at 9:47 am

    I am of the opinion is that lenders look at why they cannot do anything first, before looking for the solutions. A case in question, a recent case with a certain lender, declined beyond the clients age of 60, because they were in the police and that statutory retirement at 60, meant that they would have no income! This crass assumption denies the fact that the person can still work, I would assume it is also against the equalities act of 2012, plus the fact the client would have a substantial pension to supplement any future position. What makes that lender policy even more out of date are the police pension changes 2015, which after conversations with the providers, will end compulsory retirement ages, though the pension will now be paid from age 60 as opposed to 55. The reason I mention this, if that is a lender attitude now, how can the industry move forward on helping people who have the financial capacity to pay in retirement? It is pointless to talk about a joined up approach, when everyone does their own thing and there is a lack of appetite to do anything about the situation. The hardest problem with people and equity release, were the historic horror stories, but, also the pressure on people to leave their children something after they have gone, we often hear in Parliament, about inheritance tax, leaving a legacy etc. but, for most of us all it takes is to own your own house and end up being put in a care home, when that goes through the window, councils can and do put an all monies charge on your property to pay for your care, which will be ravaged until I believe there is £27,000 left, because the government, never increased the minimum amount left. So many problems, to overcome, but, what if lenders removed the maximum age when a mortgage Must be repaid? Look at introducing a specific equity release mortgage for clients that are potentially vulnerable due to age, interest only mortgages or people that want to remain in their home? Maybe a shared equity, equity release scheme? So clients can pay a small rent, plus have released the equity in the property to pay off the bulk of the mortgage, but, also protecting a percentage to leave as a legacy? But, the reality is lenders do not want to become landlords, and by having end dates, they can work out their incomes easier. As I say I am not sure, but, I think that there are enough brains in the industry to come up with some good ideas, to bridge the gap!

  • Carl McGovern 7th September 2015 at 4:12 pm

    It is very Interesting that Linda Woodall should state that ” It is a product that has a place, but anyone considering such a move, should do so advisedly because it can be expensive. I whole heartedly agree with this comment.

    What are the options though for someone seeking Mortgage finance, beyond a certain age and once they have retired? Most lenders are still putting an age restriction on the end date of their Mortgage. I understand that when it comes to using earned income, but have no idea what such a restriction exists, with Pension Income. Some lenders suggest that is a restriction that they have due regulatory pressures, yet the regulator suggests otherwise.

    I am sure the Equity release market would contract, if the lenders did remove the upper age limit, but it would give retired people more options and also access to lower rates and cheaper fees..