The publication of further directives and legislation from the regulatory body is often met with collective groans across the industry, but the FSA’s recent issuance of the final mortgage market review rules received a much warmer reception.This may have been because there were very few surprises within the instructions, but it’s also largely due to the fact that much of the new guidance takes a common-sense approach and has obviously been informed by stakeholder feedback.
It has long been argued that the point of regulation is to protect the consumer’s best interests, but this time it really feels like the powers that be actually mean it.
At the heart of this is a concerted drive to make the whole process more consumer-friendly and the FSA has issued further simplification and clarification on areas that were previously subject to interpretation.
There also seems to be more emphasis placed on helping borrowers in difficulty which could be interpreted as good news for the equity release sector as an increasing number of older homeowners are finding themselves in somewhat sticky situations as they near retirement.
The latest rules also include a marked attempt to stop mortgage lenders discriminating against borrowers because of their age.
This is a welcome move and belated acknowledgement that lenders’ criteria and underwriting rules are not keeping pace with an ageing population who expect to work and live longer. As well as levelling the playing field for borrowers of all ages, this will hopefully see a reduction in the number of ‘mortgage prisoners’ who are unable to remortgage and are stuck with their existing lenders.
But perhaps the greatest news for the equity release market is the enhancement of the clear provider guidelines and the ruling that all equity release customers will have to be advised once the MMR is implemented in 2014.
This means customers will be unable to opt-out of advice and while they can still theoretically reject this and pursue their own path, the dearth of execution-only plans will make this nigh-on impossible.
Opponents of the shift to fully-advised argued that it paints the elderly as less financially capable and, while the regulator rejected this suggestion, it has classed equity release as a vulnerable customer category alongside debt consolidators, sale and rent back and Right to Buy.
Despite what the critics might say, this doesn’t mean the FSA is somehow being demeaning or patronising to potential equity release plan holders, but merely that it recognises the importance attached to making such a significant decision.
As a vocal sector stakeholder, we have always been at pains to highlight the magnitude of older homeowners making financial decisions and taking their time to discuss all the available options with their loved ones, so anything that acknowledges this and adds to providers’ sense of responsibility is welcome.
The Equity Release Council’s rebranding has enhanced the professionalism of the sector and, similarly, the MMR should be viewed as a further opportunity to help the equity release market grow.
Chris Prior is manager of sales and distribution at Bridgewater Equity Release