The Council of Mortgage Lenders is calling for a more “joined up” approach to advice for older borrowers and to narrow the gap between mainstream lifetime mortgage advice silos.
The industry trade body said the current framework for delivering guidance and advice was divided into two distinct silos – lenders and intermediaries who lend and provide advice on residential mortgages and those that deal with equity release.
The report – written in conjunction with the Building Societies Association – suggests the two markets have very different attitudes towards borrowing in later life.
While residential mortgage lenders have traditionally viewed borrowing as a means to accumulate equity and a retirement free of debt, lifetime mortgage lenders see borrowing in later life as a means to help customers “extract value” from the accumulated equity.
The report suggests consumers are maybe frustrated at barriers to borrowing, some of which can seem to them unfair.
The CML recommends lenders and advisers operating in this market should consider how best to deliver a more joined up approach to advising later life borrowers.
It believes regulators and residential mortgage lenders should further explore how they judge affordability in retirement, taking account of income from investments, savings, DC pensions and state benefits.
Lifetime mortgage lenders should also continue to build more flexibility into lifetime mortgage products to allow partial or full early repayment of interest and capital with lower costs for doing so.
June Deasy, head of policy, CML said: “Older people have to make complex, often inter-related decisions about a range of financial services products, from pensions, wealth management and mainstream mortgages, to equity release. More flexible ways to borrow and use housing equity throughout life will play an increasingly key role in how these decisions are made.
“With advice regimes segmented due to different regulatory conduct rules and permissions, different types of advisor; and different product heritage, CML has long called for a smoother experience for consumers. The research shows that consumers can see a disconnect between their need and the service provided, and a desire for clearer signposting to their options. CML believes that government is best placed to facilitate this signposting role, as it develops its Single Financial Guidance Body.”
Nigel Waterson, chairman of the Equity Release Council, said: “We agree with the CML that the mainstream mortgage and equity release markets should strive to work more closely. In doing so, the best possible outcomes can be delivered for consumers and we are always open to the opportunity to work with other industry bodies and regulators to achieve this goal. We hope that by working collaboratively, we can make further progress in joining the dots between equity release, residential mortgage, and pensions.
“Every consumer has different needs, and it is vital that advisers possess a comprehensive knowledge of a range of potential solutions, including those available via the wider mortgage market. We fundamentally support any initiatives to drive greater volumes of referrals between specialists, especially where customers’ needs can’t be met within an organisation.
“We are also encouraged by the CML’s acknowledgement of the significant progress the equity release sector has made in recent years towards serving a broader customer base, through the addition of more flexible products and new entrants to the market. Equity release advisers and providers are experts in later life lending and play a vital role in helping people financially plan for retirement.”
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