FCA urges lenders to develop flexible products for older borrowers


The FCA has urged lenders to develop products to better suit the changing needs of older borrowers.

Lending into retirement has become one of the biggest issues in the mortgage market since the MMR. Before the rules were launch in April 2014, many lenders cut their maximum age limits, therefore making it more difficult for borrowers to obtain finance if the loan extended into retirement.

The problem is likely to get worse unless lenders change their stance, especially as around a third of the population will be aged 60 and over within the next 25 years, up from 23 per cent today,

Speaking at the Council of Mortgage Lenders’ annual conference in London today, FCA director of supervision for the retail and authorisations division Jonathan Davidson said: “The ageing population is one of the biggest policy and social challenges of our time and I think the mortgage market has a role to play. We in the regulator are not immune from this pressure either and we will consider what differences we might make to support a market that works for all of its customers.”

He added that collaboration among lenders and the regulator would be needed to solve the problem.

Davidson said borrowers’ lifestyles had changed and that they are now more prepared to use their home to fund their lifestyles in retirement.

He said: “A mortgage was once a relatively simple and standardised product as a means to homeownership, cleared in 25 years and well before retirement. Now people aspire for their home to provide a pension, finance long-term care, a deposit for children and grandchildren and inheritance – sometimes simultaneously.

Davidson added that equity release is “not a panacea” for older borrowers.

He added: “There is, I believe, an opportunity for a range of flexible products which could work around people’s lives as well as the underlying the asset. We, at the FCA, are keen to support innovation in this area, which is in the interests of consumers.”

Davidson’s statement comes days after a report in the Sunday Times which claimed a number of building societies had agreed to review their lending into retirement criteria.