The Financial Conduct Authority (FCA) has launched a market study into later life mortgages to determine how prepared the market is to meet consumers needs now and in the future.
Given recent government analysis of future pension incomes, which shows 43% of people are under-saving for retirement, the FCA says it considers lifetime and retirement interest only (RIO) mortgages could play a greater role in enabling consumers to access equity in their property, with a lump sum payment or drawdown facility.
Over-55s hold the majority of household property wealth in the UK, at an estimated £3.7 trillion as of 2022. The regulator also considers recent affordability pressures and higher interest rates mean that more consumers will have to make standard mortgage repayments into retirement.
As it stands, the market will need to develop to meet evolving consumer needs, the FCA says. There was around £2.4 billion in new sales in 2025 and it is the FCA’s understanding through its relationship with providers that meeting increased demand from a greater range of customers could pose challenges, including providers’ funding, the nature of advice, and consumer awareness, understanding and trust.
The recently published terms of reference document outlines the challenge facing consumers and providers; given the spectre of financial difficulties in retirement, housing wealth may enable people to continue to live in comfort in later life. The FCA wants to ensure the right structures are in place to enable the market to grow and meet demand, it said.
In 2025, around 27,000 lifetime and 3,000 RIO mortgages were advanced in the UK, with a value of £2.16 billion and £282 million respectively. The median age of consumers taking out these products was around 71, the median property value ranged from £290,000 to £350,000, and the median loan-to-value ratio was around 15% for lifetime mortgages and 27% for RIO products.
Most lifetime products are funded by the insurance sector; other sources of funding include pension funds, reinsurers, and private credit funds. Firms with such funding can offer their own products or provide funding to separate specialist providers.
Given there has been “very little successful entry in recent years” into the market, the FCA says the review will “explore key features of the provider market to assess any obstacles to entry and growth, and their effects.
The organisation added:
“We will prioritise areas where we may be able to act to reduce these barriers, to support competition and promote better consumer outcomes and market growth. We will also prioritise tackling any features that may also limit proconsumer innovations.”
The FCA says some stakeholders have told it the way lifetime mortgages are funded and certain regulatory rules may either hinder growth or deter firms from entering the market. The review will examine consumer understanding and how this impacts planning and decision making.
Concluding the terms of reference, the FCA said it was approaching the review with “an open mind”.
“We may find that without any intervention the market can and, driven by effective competition, is likely to develop to meet anticipated demand in a way that fully supports consumers’ decision-making and delivers positive outcomes. Alternatively, we may find that change is needed – possibly significant reform. We would then consider how to help the market adapt and get the right long-term solutions in place, which may include working with government or other bodies. We would prioritise solutions that support competition and innovation, and enable consumers to easily access products and services which meet their needs and provide fair value.”
The regulator is accepting views until 17 April and aims to publish an update by the end of this year.
