Equity release not the answer, warns FCA chief executive

John Hewitt Jones

September 16, 2016

Savers should think carefully before buying houses or using lifetime mortgages to fund income retirement, Andrew Bailey, chief executive officer of the Financial Conduct Authority (FCA) has warned.

Speaking at a pensions conference in Gleneagles, Scotland, the executive warned of the danger posed to consumers by tying up all their capital in one asset.

Bailey said: “Given the scale of uncertainty over long-run real returns on assets, I would not favour over-weighing to any one asset class.”

The CEO also highlighted that the Bank of England’s Financial Policy Committee – of which he is a member – has become increasingly concerned about levels of household indebtedness.

Speaking specifically about equity release mortgages, Bailey said, “The approach has an appeal”, but underlined complications surrounding the structure of equity release products. He stated that economic uncertainty makes it difficult “to write long-term financial contracts which embed assumptions on future returns.”

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