The Financial Conduct Authority (FCA) which regulates the financial services industry is concerned some advice is not being tailored to customers specific circumstances.
It is a requirement that anyone wishing to take out equity release – a product which allows older homeowners to access some or all of the money invested in their home – should receive advice first.
But the FCA said it was worried advice was ‘not up to scratch’ and found evidence of advisers adopting a ‘form-filling’ approach to fact finding.
Working well
Overall the FCA thought the market was ‘working well’ for many customers.
What’s more, the Equity Release Council, the industry body for the market, said equity release made up fewer than 2% of complaints about home finance products and of 38 complaints made to the Financial Ombudsman Service in the last year only two were upheld.
However, firms providing equity release have now been asked by the FCA to take action to ensure customers were receiving advice ‘tailored’ to their personal circumstances.
Jonathan Davidson, the FCA’s director of supervision, retail and authorisations, said: “Deciding to enter into a lifetime mortgage is a big decision with a big financial impact for consumers.
“In many instances it makes sense but whether it does or not depends on personal circumstances and how they might change.
“It is therefore critical that advice offered to consumers looking at lifetime mortgages is suitable to their personal circumstances. It is clear from our review that advice being offered to such consumers, including some vulnerable consumers, is still not up to scratch.”
David Burrowes, chairman of the Equity Release Council said equity release helped to meet important social needs, from boosting retirement income to funding home improvements, repairs and adaptations.
He added: “We will continue to work with members and the wider market to make sure this is a universal characteristic, by developing and embedding best practice standards which we would like all firms to sign up.”
Advice to homeowners
Meanwhile, the FCA urged anyone considering taking out equity release to assess the long term implications and costs before proceeding.
Davidson added: “If in doubt as to whether a lifetime mortgage makes sense for you as a consumer, you should explore your personal circumstance fully with your advisers or with independent sources such as the Money and Pensions Service.”
