Lifetime mortgage rules challenged

Lifetime mortgage rules challenged

Relaxing mortgage affordability rules could help more lifetime mortgage customers take up the option to make interest repayments initially before switching to a roll-up arrangement, according to The Equity Release Council.

Amendments to the Mortgage Conduct of Business rules following MMR mean that lifetime mortgage contracts which permit, but do not require, consumers to pay interest for a period are subject to the requirement of providers to assess their affordability.

The Council says this is despite the fact that payments of interest are always optional and that customers will never be at risk of losing their home as a result of being unable to continue with interest payments.

As a result, some customers who would have taken out a lifetime mortgage giving them the option to repay interest for as long as they wished might not now pass affordability assessments, may be reluctant to subject themselves to the assessment process or be recommended alternative products.

The Council has asked the FCA to consider whether a relaxation of rules originally designed for residential rather than lifetime mortgages would help more consumers unlock their housing wealth while protecting a larger amount of equity in their property. It added that a relaxation might also support existing providers’ ability to expand their product range and encourage new entrants.


It also recommended that the FCA engages with the Prudential Regulatory Authority to consider how equity release is currently funded, the extent to which current prudential requirements create barriers for firms, and whether a broader approach could be taken which would enable alternative sources of funding to be accessed.

Nigel Waterson, Chairman of the Equity Release Council, commented: “We welcome the proactive decision by the FCA to review whether there are any barriers to competition in the mortgage sector. Retirement lending is a crucial part of this and there needs to be careful consideration of the factors which differentiate ‘residential’ and ‘lifetime’ borrowing.

As part of our wide-ranging input we highlighted that revisiting affordability rules may help more consumers to make use of options already offered by equity release providers in later life, as well as encouraging more new entrants to the market.

There is a growing recognition that equity release has an important part to play in the planning of funding for later life, and we look forward to working together with the FCA on the back of its findings.”

Join our mailing list:

Leave a comment



Latest Comments

Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

view article
richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

view article
Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

view article
maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

view article
maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

view article
zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

view article
Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

view article
Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

view article
RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

view article
sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

view article
Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

view article
Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

view article

Related stories

More articles from Finance