14 September 2023
Equity Release Council responds to FCA review of later life mortgages
Responding to the FCA’s review of later-life mortgages which was published today, Jim Boyd, CEO of the Equity Release Council, said:
“We support the FCA’s engagement with the lifetime mortgage sector, which helps tens of thousands of customers each year to enjoy better standards of living.
“We share the regulator’s commitment to putting customers first and ensuring they are fully informed and advised about their options. Its findings will inform our ongoing standards-setting work to help raise and reinforce best practice consistently across the sector.
“Modern equity release helps people to enjoy financial freedom and a better quality of life. Carefully considering the option of releasing equity, alongside all alternatives, should be part of every homeowner’s retirement planning.
“The Council and our members are undertaking significant work to reinforce advice standards and ensure clear customer communications. We wholeheartedly support the new Consumer Duty and will continue to work with the regulator, members and wider industry to take every opportunity to improve customer experiences.”
Notes to editors
Modern equity release products – which are predominantly lifetime mortgages – allow customers to access the wealth tied up in their homes, with:
- The option to release funds in stages, when needed, with interest only charged when money is withdrawn;
- The flexibility to reduce or avoid paying compound interest by making voluntary partial repayments when they can afford to
- The freedom to repay their loan in full with no early repayment charge (ERCs) after a fixed period of time, for the majority of products;
- The ability to ringfence a guaranteed minimum inheritance amount to leave behind to loved ones.
Equity release is estimated to provide approximately £1 in every £90 spent by retired people, according to a 2021 study by the Centre for Economics and Business Research
The biggest study of its kind into the experiences of equity release customers, carried out in 2021, showed 90% have or would recommend it to family and friends, with more than two in three saying it has made a substantial difference to their quality of life.
Both lifetime mortgages and residential mortgages have been formally regulated since 2004. Lifetime mortgages and other equity release products have also been held to higher standards for longer, via industry rules first established in 1991 and overseen by the Equity Release Council. These guarantee that all customers have:
- independent face-to-face legal advice prior to deciding to take out a plan – a unique and vital safeguard which helps to protect potentially vulnerable customers
- fixed or capped interest rates for life for every withdrawal
- the right to move home
- protection against owing more than their property is worth, via a no negative equity guarantee
- the right to make voluntary penalty-free partial repayments to reduce the impact of compound interest.
Regulated advisers who are members of the Council must ensure they explore 25 key areas when delivering advice assessing a customer’s potential suitability for equity release.
Standards setting work:
- Following the FCA’s review of sales and advice in 2020, we published an updated checklist for advisers supported by a detailed good practice guide, with a particular focus on recording of soft facts, personalisation of adviser documentation and discussions around income and expenditure
- We undertook a wider review of Council standards, rules and guidance to ensure they supported the regulator’s objectives.
- We have published an industry-wide competency framework to support adviser development, which is used as the basis for training programmes by a number of leading adviser networks.
- We have also produced a guide to help consumers better understand and compare fees and charges across different equity release products. The guide sets out a consistent way of describing fees and charges using clear, simple and standardised language that is easy to understand
- These actions have been reinforced by issuing regular regulatory, policy and compliance briefings, issuing guidance notes and hosting technical briefings on areas including the new Consumer Duty requirements.
Please see the FCA’s press release here for reference.
The Equity Release Council is the representative trade body for the UK equity release sector with more than 750 member firms and 1,900 individuals registered, including providers, funders, regulated financial advisers, solicitors, surveyors and other professionals.
It leads a consumer-focused UK based equity release market by setting authoritative standards and safeguards for the trusted provision of advice and products. Since 1991, more than 650,000 homeowners have accessed £46bn of property wealth via Council members to support their finances.
The Council also works with government, voluntary and public sectors, and regulatory, consumer and professional bodies to inform and influence debate about the use of housing wealth in later life and retirement planning.
For more information:
Email Instinctif Partners at [email protected]
Phone Jamie Till and Libby Wallis on +44 (0) 207 457 2020