With the final rules from the Financial Services Authority published and the regulator accepting applications for authorisation, the clock is ticking with the deadline of April 6 2007 fast approaching.This is a good time to provide a reminder about the main issues surrounding home reversion regulation, and it’s also a good time to revisit advisers’ responsibilities when advising on lifetime mortgages. The reversion regulations follow the structure attributed to lifetime mortgages as much as possible. That said, there are a number of differences that will soon become evident to any provider offering both products, and certainly they will be obvious to those advising on both products. Where differences – or as some would say discrepancies – occur it is usually due to the fact that the Treasury and the FSA are clear in their view that home reversion is a higher risk transaction than a lifetime mortgage due to the fact that the client is giving up ownership of their home. In the lead-up to regulation I will take a look at some of the differences in the regulator’s approaches to the two product areas and look specifically at risk as-pects that differ from the lifetime mortgage regulations. One factor that will remain after regulation is the fact that advisers will be able to elect whether they advise on lifetime mortgages or home reversions only, or whether they advise on both products. This fact does not exempt an adviser from considering the alternative product as potentially more suitable just because they elect not to advise on it. The impact of this aspect of lifetime mortgage regulation has still not hit home, although it is clear from the FSA’s comments that it is looking at the quality of evidence documented to support recommendations where reversion may have been more suitable. In the months ahead there will be instances when advisers and providers question some of the home reversion rules as in some areas they are more onerous than those for lifetime mortgage. For now, this rests on an acceptance that a house sale is regarded in a different light.
Last week provided a timely reminder for those who have been sitting on the fence that home reversion regulation is well and truly on its way.