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FCA to investigate whether regulation is holding back equity release

Linda Woodall 700 x 450

The FCA says it will investigate whether regulation is holding back the equity release market in the UK.

At an FCA-organised conference in London today, director of strategy and competition Christopher Woolard called the UK and European Union equity release markets “relative minnows” compared to the US. He cited EU calculations that 13 member states had recognised equity release markets but that these accounted for just 0.1 per cent of total mortgage lending.

Speaking during a journalists’ briefing, acting director of supervision – retail and authorisations Linda Woodall said the FCA would investigate whether regulation was holding back growth in the sector.

She said: “We need to look [at equity release] because in comparison to other countries equity release has progressed pretty slowly in this country. That doesn’t mean we should take off all of the constraints.

“It is a product we think has a place but anybody considering such a move should do so advisedly because it can be expensive.”

She added that the regulator wanted to ask the industry whether there are possible alternatives to equity release that could be offered to customers instead.

She said: “I don’t know whether we can say that, at this stage, it means loosening [restrictions on the sector] but it means we have to look at it but also to stimulate consideration of other products that can maybe come before equity release that maybe do not exist at this time; products that flex with borrowers’ needs as they get older.”

In the first half of the year, equity release providers lent £710m to customers – a half-yearly record. However, to put this into context, any one of the largest 15 lenders in the UK lent either the same or more individually than the equity release sector did as a whole in H1.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. FCA to investigate whether regulation is holding back equity release…Let’s save the FCA some time… bad, clumsy FCA regulation is holding back every financial product.

    For example, without the brilliant MMR there might be an availability of interest only mortgages post retirement meaning the equity release companies might have some compitition and could reduce their excessive rates.

    just a thought.

  2. At least it keeps the incapable in jobs for another year – all that matters in FCA world.

  3. Actually Equity Release is not being held back enough in its present form. It needs a root and branch regulatory ‘seeing to’.

    As I posted on a previous article about Equity Release having a bad reputation this is what I think needs to be done before encouraging this product (anyway should it be encouraged at all?):

    1. Ban all commission.
    2. Ensure that 1. above leads to reduced terms for the client.
    3. Ensure absolute transparency – there are too many instances of third and fourth parties taking a cut – which is buried deep in the small print.
    4. Ensure that the disclosure documents are shorter, clear and concise with no small print and that all monetary disclosure and costs (including the adviser fee) appears on page one in lager point bold type and that these costs show how it affects the deal. Also on page one it should show that if house prices remain static – how long it would take for the interest (in the case of lifetime mortgages) to eat up the whole value of the house. Illustrating anything with the assumption of rising property prices should be banned.

    Maybe then this product will become just a little more fragrant.

  4. Thanks for spoiling my evening Soren. I can’t even see the letters M M R without sinking into a foaming-at-the-mouth rage. This wasn’t just a blunt tool, but one where the blade was positioned at the handle end. What WERE they thinking?

  5. Of course there are significantly cheaper alternatives, the MMR & previous regulatory guff killed the Home Retirement Plan (Halifax) 40 year interest only borrowing for the over 55s. It had a low SVR with a quantifiable amount throughout the term with the ability to reduce or fully repay at any time. The individual serviced the interest only payment and dependent upon the level of borrowing it was generally well below any rents payable for a similar property.

    This also left clients with the ability to take adavantage of the equity release product at a later date, particularly with the increase in their age allowing a higher borrowing percentage at the later date.

    Thanks Mr. Sants et al great unintended consequences! Inept & clueless

  6. Why is it necessary for an IFA who specialises in at or post retirement advice and who does not advise on mortgages and has ER1 have to passed CeMAP and obtain the necessary mortgage permissions to do the odd equity release case? This is an example of FCA vagueness in terms of permissions and if this is the case stupidity. Yes we can do home reversion…
    Even the ER1 manual offers no clarity on the situation regarding permissions but this is our understanding and indeed that of compliance support firms.

  7. While this is a welcome review (although I feel the answer will be “No regs re not holding back E R, we think we have this about right, generally”) I feel they should be looking at how it is holding back every other type of financial advice. Surely it would make so much more sense to look at how they are affecting the massive part of the market.
    Still it will keep people in a job for a while longer

  8. MMR = another truly clueless intrusion into a market which was not broken in the first place. Thus allowing Equity Release to become the ONLY option regardless of the cost – assuming of course the client qualifies in the first place.

    This truly massive train wreck is on the horizon as a DIRECT result of MMR and don’t say you were not warned FSA/FCA – but then again, that is part of the Regulatory job creation program after all.

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