FCA review into later life mortgages finds 'poor advice'

The FCA has required those firms which fell short to improve the quality of their advice.

Related topics:  Later Life,  Mortgages
Rozi Jones | Editor, Barcadia Media Limited
14th September 2023
"We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the Consumer Duty."

A new FCA into later life mortgage firms has found evidence of "poor advice and misleading promotions".

The review looked at firms responsible for around half of all lifetime mortgage sales. It found in many cases advice did not meet the standards expected, including a lack of evidence that sufficient consideration of consumer’s individual circumstances had been given and advice lacking discussion of alternatives.

The regulator says it has worked with the largest firms to improve their advice processes and prompted the removal or amendment of almost 400 misleading promotions.

The majority of firms in scope of the review also changed how their advisers are incentivised. Anyone who believes they were poorly advised can complain to the firm and, if they are dissatisfied with their response, to the Financial Ombudsman Service.

The regulator warned that "other lifetime mortgage advisers must pay close attention to the review’s findings and act immediately where they need to".

Sheldon Mills, executive director of consumers and competition at the FCA, said: "Releasing money tied up in your home later in life is a big decision and can have a financial impact on consumers and their families well into the future.

"Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them. We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the Consumer Duty."

Leon Diamond, CEO and founder of LiveMore, commented: “We wholeheartedly welcome the FCA’s report into the lifetime mortgage sector, which highlights practices in the industry that deserve the regulator’s attention.

“The effect of compound interest on a lifetime mortgage is significant, especially in a high interest rate environment, making this form of finance expensive if a mortgage is held for many years. So, if a standard mortgage is affordable, that is usually the best outcome for the customer and there is an easy way to find that out.

“We are firmly of the view that an affordability assessment should be undertaken, in all cases, before any decision is made about going down the route of a lifetime mortgage.

“A fundamental part of an adviser’s role is to fully understand the income and outgoings of customers. This provides a clear picture of whether they can afford monthly mortgage repayments and should be the first option to consider. If an interest-only or a capital and repayment mortgage is not affordable then a lifetime mortgage could be the second option.

“Anything that improves the industry for the good of the consumer can only be a good thing and this report from the FCA is a strong reminder for every broker and lender to put the customer first.”

Paul Glynn, CEO of Air, added: “Any Financial Conduct Authority announcement which highlights perceived failings in an industry is never welcome news, but the FCA did note that all firms included in the review have already made changes to sales and advice processes to address these points. Our sector needs to build on this work and consider how we avoid the behaviours called out by the review if they are evident in a firm’s approach.

“Given the recent introduction of Consumer Duty legislation, advisers are already stepping up but robust compliance, clear documentation and a commitment to ongoing education and training need to be part of a firm’s DNA. Whether you choose to use resources or training from platforms such as Air or look directly to lenders for insights, there is a significant amount of resource available.

“Advisers who operate in the later life lending market understand their responsibility in helping older homeowners make the right choices, so we need to actively consider how we personalise, achieve, and document this.”

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