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FCA: Debate needed on older borrowers

Mortgage Introducer

September 7, 2015

Speaking at the Financial Conduct Authority’s first mortgage conference today Christopher Woolard, director of strategy and competition at the FCA, said there was a clear need to address the needs of older borrowers in the UK and encouraged debate in the industry.

He said the equity release markets in the UK and more widely in the European Union were “absolute minnows” which raised the question of whether there remain “barriers to entry or competition”.

Woolard said: “We believe there is an need for debate on the equity release market, on what products might be needed and whether there is a need to foster more innovation while also protecting the customer.”

He raised concerns about the level of indebtedness that older borrowers could expose themselves to but warned that there was a growing need to consider how the market serves this sector of society.

He added: “The ageing population is one of the biggest societal issues we face today in the UK. The number of 85 year olds in the UK is forecast to grow 244% in the next 35 years.

“These people are asset rich and cash poor and with the average pension pot around £30,000 the ability to access some of [the value in their homes] could make a very real difference.”

Linda Woodall, acting director of supervision, retail and authorisations at the FCA, said that reviewing the need for more innovation in equity release as well as addressing whether there is a need “to stimulate consideration of other products that come before equity release” did not necessarily mean the regulator would consider “loosening” regulation in this sector.

But she said that the role of government is “pretty key in this space” if the industry, regulator and government were to combine to create better outcomes for consumers.

She added: “The industry does need to look at this though and it may be that there is a need for products that come before equity release that don’t currently exist and that perhaps flex with borrowers’ needs.”

Speaking during a panel debate at the event Moray McDonald, chairman of the Council of Mortgage Lenders, said the lender trade body was already working with the Building Societies Association to address the needs of older borrowers.

But he added: “Are we currently innovating to serve older borrowers? I think the answer has to be no. The CML is working on this but at the moment, if we were to give ourselves a report card, it would say must try harder.

“The solution cannot just come from the equity release industry – it has to come from the mainstream industry as well because most people borrow from banks.”

He raised the idea that affordability rules could be relaxed for older borrowers where there was sufficient headroom on the asset certainty for the lender to free up lenders to lend past retirement.

He added: “I think lenders are a little timid right now but the door is open at the FCA to come and bounce ideas around to try to solve some of these problems.”

A straw poll of delegates attending the conference showed that currently 60% believed that the industry served older borrowers poorly while 32% said the market provided for retirees “not very well at all”.

The vast majority of 82% said product innovation could significantly widen the appeal of equity release products.


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