Retirement and equity release sectors should be more closely aligned

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Retirement interest-only mortgages are a welcome addition to the later life lending space but there should be a closer alignment between the products and equity release options so consumers get more holistic advice, trade body representatives at FSE London concluded.

The panel consisted of six industry trade bodies – AMI, the Building Societies Association (BSA), the Equity Release Council, IMLA, PIMFA and UK Finance – to discuss a range of industry issues.

Paul Broadhead, head of mortgage policy at the BSA said that retirement interest-only is more closely aligned to the mainstream mortgage market.

He said: “I think we’re on a journey. Six building societies in that space offer it with more committed to come forward next year. The lifetime mortgage is still different subject to different requirements and we need to bring those two markets together.

“There’s not been a great deal of innovation in the retirement lending space for a number of years. So retirement interest-only mortgages are a welcome addition but are starting from a low base.

Broadhead said that given they are more closely aligned to the mainstream mortgage market, and lifetime mortgages have different requirements for advisers in terms of authorisation and qualification, urged that both industries needed to be much closer together.

He said: “I think we’re on a journey. Six building societies in that space offer it with more committed to come forward next year. The lifetime mortgage is still different subject to different requirements and we need to bring those two markets together.

“There’s not been a great deal of innovation in the retirement lending space for a number of years. So retirement interest-only mortgages are a welcome addition but are starting from a low base.

“We do however need to bring the retirement interest-only and equity release industries much closer together. There is a need for more innovation and I think we will see innovation in the future.”

Donna Bathgate, chief operating officer of the Equity Release Council said that any consideration of later life lending product options had to be couched in terms of advice.

She added: “I think it has its place. We were very supportive of retirement-interest only coming to market. It’s always good for the customer to have a choice.

“But this has to be all wrapped up around the application of advice to the consumer. It’s so important that the advice given is robust, thorough and considers the future.”

Jackie Bennett, deputy chief executive of UK Finance agreed that advice in this part of the market was crucial and consumers would suffer if they could not secure advice across all later life lending product options.

She said: “As the market becomes more complex, the customer needs quality advice.

“This is why holistic advice is so important but at the moment there’s no one place where consumers can go and get that advice. In terms of both retirement interest-only and lifetime mortgages, we do need to join these markets together a bit more seriously.”

Robert Sinclair, chief executive of AMI, said that firms were currently working in this area dependent on their authorisations. This meant some advisers were only operating in the RIO space, some only in the equity release space, and some in both.

He said: “There is a risk here to firms – they could get claims because the firm closed down the conversation with the client too early. The problem is regulation is in silos in this part of the market, but the consumer is not.”

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Written by: Houseladder