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Regulator launches investigation into equity release and later life lending

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The Financial Conduct Authority (FCA) has begun an investigation into equity release and later life lending in a bid to identify “any potential harms and how these can be reduced”.

The regulator said that its supervision team was carrying out “exploratory work” in order to better understand the market of lending to older borrowers, covering a “broad range of secured and unsecured retail lending products”.

A spokesperson for the FCA told This is Money that it was conducting discussions with industry groups and firms “to gain their insights into how the market currently functions and is likely to evolve over the next two to five years”.

The equity release market has grown strongly over the last three years, although data from the Equity Release Council confirmed that £988m of funding was provided to borrowers in the third quarter of the year, down from £1.02bn in Q3 2018.

It also noted that the three busiest quarters recorded for equity release activity have all come in the 15-month period between the third quarter of 2018 and the same period of 2019.

Lack of imagination

Lynda Blackwell, the former mortgage manager of the FCA and now an industry consultant, warned last month that the regulator needed to adopt a different approach to equity release, as currently “we are forcing older borrowers into higher-priced products through a lack of imagination and effort”.

She added: “This market is growing rapidly and, as the only realistic option available to increasing numbers of older customers, the numbers potentially being given advice that could be shown later to have cost them dearly is rising daily.”

There have also been concerns over whether the qualifications required for intermediaries to advise on equity release are sufficiently robust. 

The London Institute of Banking and Finance (LIBF) has made “fundamental” changes to its Certificate in Regulated Equity Release (CeRER) exams, including doubling the number of topics covered from three to six, as well as introducing new content which includes a more detailed look at lifetime mortgages.


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