The FCA has previously classified retirement interest-only mortgages together with lifetime mortgages, as part of implementing the Mortgage Credit Directive, effectively calling both ‘lifetime mortgages’. However, it is now proposing to separate them, not least because of the different risk characteristics. 

The FCA explained: “Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages. In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest.”

A final decision on implementation is expected to be made within three months of the end of the consultation process.