FCA rule changes to trigger retirement lending surge: more 2 life

"This is a phenomenal opportunity for all of us to help stimulate innovation and choice that will benefit the end consumer."

The FCA confirmed that it will allow lifetime mortgage lenders to skip affordability assessments for interest-charging lifetime mortgages that can convert to roll-up mortgages.

The new modification works by dis-applying the requirement to carry out an affordability assessment where interest payments are anticipated or required, providing that the specific lifetime mortgage allows the consumer to exercise at any time an option to convert the product to interest roll-up.

In its quarterly consultation, the FCA said: “There is evidence that our responsible lending rules could have contributed to the restricted development and take-up of lifetime products that allow a customer to make regular payments but switch to interest roll-up at any point.

“The cost of putting systems in place to check affordability is constraining lender entry into this market because lifetime mortgage lenders typically only offer interest roll-up loans.”

more 2 life says that by altering the rules on lifetime lending, "the FCA has opened the door for lenders to be more innovative, without compromising the high standards of this fast-growing market".

The lender believes there is now a "golden opportunity" for key stakeholders in this market, including the Equity Release Council, FCA and the Council of Mortgage Lenders, to "galvanise behind a concerted effort to move the lifetime market on and rapidly grow it".

Stuart Wilson, Channel Marketing Director at more 2 life, commented: “This announcement from the FCA is great news for lenders, advisers and consumers alike. As with everything in life, lending is not a one size fits all solution, so it’s important to ensure we are continually bringing new products to market to cater for the growing needs of consumers. In particular, we are pleased to hear about the proposed changes to KFI projections as this will help facilitate a more personalised picture, tailored to the individual circumstances of every client – something we have championed with our medically-underwritten Tailored Choice plan.

“The ERC, FCA and CML, together with lenders, specialist advisers and other stakeholders, must now unite under a common banner to support and encourage product innovation and to put advice at the heart of this sector. This is no longer a niche market, it has matured into a specialist financial planning area and we would welcome advisers, trade bodies and councils coming together to ensure lifetime lending is fully integrated into broader retirement planning strategies.

“This is a phenomenal opportunity for all of us to help stimulate innovation and choice that will benefit the end consumer. The FCA has taken the first steps, but lenders and funders now need to step up their game and deliver. We encourage more firms to enter the market, which in return will increase competition and widen the choice available to consumers.”