FCA: “Improvement” in later life lending advice needed

Sheldon Mills, executive director of consumers and competition at the FCA, said it has seen “huge growth” in the sale of lifetime mortgages, in a speech on May 5. The regulator has seen a leap from 23,000 in 2015 to “almost 45,000” in 2021.

Mills said the later life market today caters for a broader range of needs, in contrast with its previous focus on serving older customers hoping to unlock property value for a higher standard of living.

Today it enables repayment of secured and unsecured debt, supplementing poor retirement income and supporting family members, according to Mills.

“We outlined our concerns with how lifetime mortgages were sold, for example, insufficient personalisation of advice; insufficient challenging of customer assumptions; and lack of evidence to support the suitability of advice,” he commented. 

“We wanted to see improvements in this area and I encourage you to consider if your firm could do more to support consumers through the sales journey.”

The number of later life mortgages taken out by consumers has continued to grow this year, growing 21% year-on-year in Q1 2022.

Mills’ speech follows the FCA’s warning in April 2022 that it may follow up on earlier findings regarding “poor quality advice” in the later life sector.

The findings, which surfaced in 2020, included examples of advisers failing to sufficiently account for the different financial circumstances of customers, advisers relying wholly or substantially on the Key Facts Illustration (KFI) to show long-term implications of taking a lifetime mortgage and neglect to properly explore the impact of debt consideration.

Although the FCA found some cases suggesting lifetime mortgages worked well, in other cases consumers looking at equity release were not sufficiently supported by advisers in sourcing alternative and more suitable products where appropriate.

The FCA is considering whether it needs to check that standards among intermediaries giving advice have improved since.