FCA chief executive, Nikhil Rathi’s, appearance on the Fairer Finance podcast may have covered a wide range of issues, but for those of us focused on later life lending, the direction of travel appeared clear.
The FCA is clearly signalling it does not intend to respond to every market issue with fresh rulemaking, and instead expects Consumer Duty to drive behaviour and standards. At the same time, it openly accepts housing wealth will play a far greater role in how people fund their lives in retirement. Those two positions feel closely linked.
In its December Mortgage Rule Review roadmap, the FCA had already placed later life lending at the centre of the future market, committing to a focused market study and further work on delivering more holistic advice; Rathi’s comments reinforce that this is not a side issue.
As more borrowers carry debt into later life and pension provision remains inadequate, property wealth will increasingly form part of mainstream financial planning. The implication for advisers will be significant.
Consumer duty raises the bar for later life conversations
When the FCA says it expects fewer new rules because Consumer Duty should “do the work”, that should not be mistaken for a lighter touch. In practice, it means firms must take greater responsibility for identifying and addressing foreseeable harm, and for delivering good outcomes without waiting to be told precisely how to do so.
For advisers dealing with clients over 55, that raises a straightforward question: can you demonstrate that all relevant options have been considered? If a borrower is approaching retirement with limited income, insufficient savings, a maturing interest-only balance, and substantial housing equity, it becomes increasingly difficult to argue that later life lending options sit outside the scope of appropriate advice. Even if an adviser does not personally arrange lifetime mortgages or RIO products, there must be a structured and well-managed referral route in place.
This aligns directly with the FCA’s work on holistic advice. The regulator has acknowledged regulatory and qualification silos have contributed to a split between mainstream mortgage and later life lending advice - even leaving aside the further disconnect between those advising on pensions and investments. If the future framework relies more heavily on principles and outcomes, then those silos become harder to justify. Consumer Duty does not sit comfortably with advice journeys that depend on which qualification an adviser happens to hold.
Housing wealth moves into the mainstream
Rathi’s comments on retirement living standards are also telling. By highlighting that a large proportion of retirees may need to access housing wealth, he effectively positions later life lending as a normalised structural feature of the market rather than a niche product category.
The FCA’s own data underlines how early we are in that transition. RIO volumes remain modest compared to lifetime mortgage sales, and adviser numbers in the later life market are a fraction of those active in mainstream lending.
Yet demographic trends point in only one direction. Longer mortgage terms, rising property values over time, and patchy retirement savings mean the intersection between mortgage advice and retirement planning will become more frequent, not less.
This is precisely why we have been talking about moving from niche to norm. The objective is not to suggest every adviser must become a technical specialist overnight, but to argue that awareness and consideration of later life lending options should form a routine part of advice for older borrowers.
When customers are informed early enough, they are able to weigh mainstream remortgage options, RIOs, lifetime mortgages, downsizing, or hybrid approaches in a measured way rather than in response to financial pressure.
Product innovation is not the constraint
It is also worth recognising how much the product landscape has changed. Modern lifetime mortgages bear little resemblance to the sometimes rigid structures of the past. Features such as drawdown facilities, voluntary repayments, downsizing protection and products like Flexi and Horizon Interest Reward – subject to recent rate cuts within the more2life range - are designed to provide flexibility and cost control, helping customers manage borrowing in a more active way.
The FCA has recognised innovation is happening and has committed to supporting market readiness and development through its focused study.
The remaining question is whether the advice framework ensures these options are discussed at the right time? If Consumer Duty is to underpin the entire system, advisers must feel confident that raising later life lending is consistent with delivering good outcomes, not a regulatory risk to be avoided.
Fewer rules, sharper accountability
One final point from the podcast should not be overlooked. While the FCA may be writing fewer new rules, enforcement activity has increased and Consumer Duty cases are already under way. That combination suggests a shift towards judging firms on the quality of their decisions rather than their compliance with ever more detailed prescriptions.
For later life lending, that means firms should be able to evidence their approach. How do you identify clients for whom housing wealth may be relevant? How do you ensure advisers understand the options available? What governance exists around referrals or signposting? Those are the types of questions that will matter in a principles-based environment.
The FCA has made it clear later life lending is central to the future mortgage market and Rathi’s remarks reinforce housing wealth will be part of the retirement funding mix for many. If the regulator is moving towards an outcomes-focused model with fewer prescriptive interventions, then responsibility shifts decisively onto the market to respond.
