Sarah Davidson reports on the efforts being made across the industry to improve borrowing options for the silver-haired generation
What next?
In large part the industry seems to be in agreement that the environment is beginning to be right for lenders to address the issues older borrowers are facing. The FCA has shown support for innovation and through its sandbox in Project Innovate, is providing providers with a safe place to test out some of their new ideas.
However, there remain a few barriers holding further progress back. Under the Mortgage Credit Directive, brokers are forced to compare both first and second charges when advising a client; they are not required by regulation to compare an interest-only remortgage with a lifetime mortgage though.
“A change in regulation, much the same as what has happened with second charges under MCD, would force mortgage brokers to seriously understand and consider lifetime mortgages for their older clients,” argues Lambert. “A joined-up approach would allow for education in this area and thus give them the confidence to become qualified to advise in lifetime mortgages themselves or to refer to a specialist lifetime mortgage adviser thus giving a much more holistic approach.”
John Phillips, group operations director of Spicer Haart and Just Mortgages, meanwhile says there is further to go. “In my opinion, the regulator hasn’t done enough to support more flexible lending into retirement,” he says. “This wouldn’t have been too much of a problem five to 10 years ago but due to recent changes in the market, it is now a significant challenge.”
The change he would like to see from the regulator addresses the permissions issue. “The main regulatory sticking point is that brokers now have to do an equity release mortgage for this type of lending. This means that they require an additional qualification and this is one of the reasons why many do not take this path. Therefore, the regulator should look into making this option easier for brokers.”
Newell agrees. “Some may disagree with me on this but I might almost go all the way and say that lifetime qualifications should be compulsory and part of the Level 3 status for giving mortgage advice. This would definitely protect clients from having to do their own research in such areas and possibly opting for entirely wrong solutions, ending in poor outcomes all round.”
The consensus on this point is clear: a move away from product-focused advice towards retirement advice that takes account of pensions, savings, investments, mortgages and equity release rather than just the last. Indeed this was one of the CML’s recommendations in its response to the FCA discussion paper.
Stuart Wilson, managing partner at the Later Life Academy, sums it up. “We firmly believe that those advising older clients need a more rounded understanding and/or advising capacity on other areas such as pension freedoms, savings and taxation, benefits, care and estate planning but the current regulatory structure leads advisers into silos. To deliver better consumer outcomes we must see broader knowledge for advisers and clearer boundaries on advice and guidance.”
While this may be the end objective, there are signs that some networks are beginning to take the first steps towards it. Last month Sesame and PMS revealed it is piloting an equity release panel to offer its members a referral route for customers whose needs might be better met by a lifetime mortgage.
“Logic dictates that when a person speaks to a broker for advice on their individual situation, they should be offered access to the full range of products which meets their needs,” says Stephen Lowe group communications director at Just Retirement. “Therefore, excluding lifetime mortgages from this would seem wrong – especially if we expect to see more innovation in this market with these products offering features from standard mortgages.”
Both Smee at the CML and Paul Broadhead, director of mortgage policy at the BSA, agree that the regulator is listening. “We’ve found the regulator to be engaged with the debate and welcome its decision to put together a long-term strategy on the ageing population,” says Broadhead. “The important element of that strategy will be how it ensures that regulation keeps consumer protection at heart, but still gives firms the space to innovate. The regulator has been clear that lenders can only be expected to make a lending decision on the day with the facts in front of them. Yet with everything going on in the pension world, changes to people’s working lives and pressures in the housing market, lenders need assurance that decisions made today in good faith won’t be used as a stick to hit them with in years to come.”
In Q1 2016, the Equity Release Council reported that £393.3m worth of equity release products had been taken out – a record quarter for the sector. But compare that to the mortgage market which did £25.7bn gross lending in March alone and it’s not hard to see the scale of the challenge facing the industry. The debate is only just beginning but it seems fair to say, for once, everyone is moving in the same direction.
