The Council supports efforts to provide innovative and flexible options that are in the best interests of older consumers. The comment below is in response to the FCA’s publication of its Handbook Notice and final rules on ‘retirement interest-only mortgages’ in March 2018.

David Burrowes, Chairman of the Equity Release Council, comments on retirement interest-only mortgages:

“Given the scale of interest-only mortgages reaching maturity, we support efforts to address this issue and the desire to help consumers in later life. Ultimately, there is no one-size-fits-all solution to later life financial planning, and the availability of a greater range of products options will provide consumers with more choice.

“It is also important that regulators work alongside industry to ensure all product options provide the best possible outcomes for consumers now and in the future. Following the consultation phase, we welcome the FCA’s added commitment to include more rigorous affordability assessments, given the material changes that can occur for consumers in this particular phase of life and also for anyone moving from a fixed-term mortgage to an open-ended retirement interest-only (RIO) mortgage.

“It falls to the industry to ensure implementation is robust, fair and thorough. Industry now has an opportunity to introduce RIO mortgages in a way that supports joined-up planning and customer journeys, both into and during retirement. While advice may not be compulsory for every RIO product, we believe it is widely recognised that good quality advice – supported by clear guidance and signposting – has a vital role to play when making financial choices in later life, particularly when people’s needs and circumstances can and do change over time.

“In the interests of future proofing consumer protection, we would advocate providers and advisers use their experience, knowledge and influence to help ensure that customers are equally informed and supported across the full range of later life solutions, whatever their entry point to conversations about financial needs in retirement. Tackling this proactively would avoid leaving people to navigate their own way through a growing range of product solutions that, from a regulatory perspective, have different advice permissions and where there are many considerations to factor in.

“The Council has and will continue to take a lead in setting high standards for later life lending products and advice, and we will ensure that this continues with the introduction of RIO mortgages. We welcome the signpost that will be included to lifetime mortgages as a related consideration, but we would urge industry to think wider and we will continue to focus on how the customer can be given sufficient information at the right time to make informed choices.”