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FCA wants to see more innovation on lending into retirement

The FCA says it wants lenders to innovative so they will be more willing to lend to borrowers where the mortgage term extends into retirement.

Speaking at the Financial Services Expo in Manchester yesterday, FCA mortgage and mutual sector manager Lynda Blackwell said the reason why many of the bigger lenders do not lend beyond 75 years of age is that they rely heavily on automated systems.

She also said she understands that following the Chancellor’s Budget announcement on pension freedoms, it makes it harder for lenders to determine whether a borrower can afford a mortgage in retirement, as there is no certainty what their income may be.

But she added that the FCA would like to see more innovation in this area so more customers can borrow into retirement.

She said: “It would be quite nice to see some innovation and some products appear that would help get over this problem.”

The Mortgage Market Review, which came into effect on 26 April, does not prohibit lending into retirement but insists lenders ensure borrowers can afford their mortgage when they retire.

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  • Phil Martin 30th May 2014 at 11:39 am

    “FCA wants to see more innovation on lending into retirement”

    1) Income based lending is not appropriate, nor responsible for the majority of retirees who have a low or reducing disposable income.

    2) Asset based lending is a better way forward but the market has some products available already and although we could benefit from more, these products are not suitable for the majority of retirees who cannot mean the criteria.

    3) This leaves us to consider a third category, I would call these “Asset Conversion Products”.
    We had a brilliant and innovative one, it met exactly what the FCA is calling for.
    It allowed retirees (who only had 20%-25% equity and little income) to convert their property ownership to a long term secure tenancy, rent of which in most cases could be state funded when their income ceased. This stopped them from living in fear of repossession and allowed them to stay in their home.

    This superb product was called Sale and Rent Back.

    Unfortunately the FSA at the time decided to regulate it out of existence based on what the then CAB Director admitted was a handful of complaints and pressure from the CML who wanted to close what they perceived was a loophole from repossession.

    Am I the only one who considers such a call for innovation from the FCA slightly hypocritical?

    The home buying and property trading industry, in harmony with brokers and regulated providers do now have a possible obligation to come up with other innovative and creative solutions.

    One which we now offer is a Relocation Package where we purchase a home and relocate the family with a long term tenancy, as the Joseph Rowntree foundation suggests, stepping down from the housing ladder, as their circumstances change.

    Another is purchase option backed equity release product for those funders who will take a long term view of such assets.

    Any other ideas for more innovation as requested?

    Innovation needs to be balanced of course with commercial viability, something the regulators sometimes forget.

  • Npe Nope 22nd May 2014 at 5:13 pm

    “FCA wants to see more innovation in mis-selling claims in future…”

    Now lenders are legally responsible for assessing affordability (rather than just doing it for boring old credit risk reasons), let’s get a book going on how long until the first mis-selling claims around affordability assessments once some post-MMR MCOB cohort start to hit default. The loans extending into retirement should get some fantastic coverage in the more excitable/lazy bits of the media.