Last week, the FCA chief executive Nikhil Rathi shared his vision for the mortgage market of the future, in a speech given at L&G Mortgage Club’s 30th anniversary conference. The speech highlights the importance of later life lending as part of building the mortgage market of tomorrow, but the customer need is already evident and this should now be a major focus for advisers in general and mortgage market advisers in particular.
He is right to ask whether some of the UK’s £9 trillion of housing wealth can be unlocked more effectively and put to more productive use, particularly to sustain living standards in later life. The FCA stresses that it doesn’t have all the answers and more work needs to be done on new rules with a focus on standards of advice and promotions.
Key Advice & Air would like to see consideration of property wealth included as standard in Government-backed guidance services such as Pension Wise and Money Helper. Furthermore, the approach to signposting all options for borrowers over the age of 55 should be applied consistently by lenders and intermediaries.
Much work is still required to raise awareness among consumers and mainstream mortgage and wealth advisers around how property wealth can be used to fund later life. More recognition is required around the innovation that has taken place in the later life lending sector and broader acknowledgement that products have moved far beyond just supporting a ‘last resort’ and should be a norm for the many.
Later life lending products available now offer a wide range of benefits including the ability to make voluntary repayments and rate discounts for customers committing to serve some or all of the interest. These modern products allow the flexibility to mitigate the impact of compound interest and manage cost of borrowing whilst still maintaining standard of living even as customers income or costs fluctuate.
Increased use of existing later life lending options including lifetime mortgages as part of a holistic and proactive financial planning strategy rather than a last resort, should be a major focus.
Advisers need to be having comprehensive conversations with customers, and their families and looking beyond their specialisms or scope of advice. As the FCA notes across pensions, investments, and mortgages advice is often siloed. Even mortgage advice is split between mainstream and equity release specialists.
That lack of holistic mortgage advice is holding back customers from being able to access suitable lending options and putting them at risk of opting for solutions which are driven by the type of adviser they consult rather than the ones that will deliver the most suitable outcome.
Within the industry there are already pockets of best practice that demonstrate that it is possible to offer all options and to deliver consistently good outcomes. These can include the use of trusted referral relationships if firms do not want to advise on later life lending – as well as equity release advisers referring back to mainstream advisers if they want to maintain a tight specialism.
The options are available for older customers and the direction of travel from the FCA is clear. There is no need for advisers to wait for the regulator to consult further before taking action. Advisers must expand their field of vision and consider all options in order to deliver good outcomes in line with Consumer Duty obligations.
