FCA feedback is welcome but later life changes need to be faster

There is a lot to welcome in the FCA feedback statement on the Mortgage Rule Review but in order to drive meaningful benefits to consumers wider change needs to start now.

The FCA roadmap shows a focused market study will take place during 2026, to ensure access and readiness of the later life lending market to meet the expected increase in demand.

This is a great step forward for the sector and we should all welcome the further opportunity to engage and support well informed rule changes across the more complex elements of the rules, however, this shouldn’t prevent the FCA from consulting sooner on other changes which have already clearly emerged from the results of the Discussion Paper.

In particular, silos in mortgage advice and actions to address the lack of consumer awareness of their options in later life don’t need to wait until 2027 to get ahead of what we know needs to change now.

The overall focus of the FCA feedback statement for the later life lending market reinforces the need to drive good customer outcomes and fair value in line with Consumer Duty and demonstrates a welcome commitment to continued evolution across the market. This includes further acknowledgement that property wealth needs to be normalised as part of mainstream retirement planning, firmly placing the later life lending market in the mainstream rather than an option of last resort.

The FCA is right to highlight low consumer awareness of lifetime mortgages and the need for informed change. The expectation must be that this will be developed during the work in the first half of next year. While wider questions need further in-depth consideration, such as what true ‘holistic advice’ really means, this shouldn’t mean all changes for the sector are deferred.

It would be good to see those changes that are credibly reinforced during the Market Study process being advanced as soon as possible and not delayed until the FCA has reached the end of its roadmap.

That would be particularly valuable where those changes are improving advice pathways for borrowers or lifetime mortgage frameworks as these changes are going to benefit more customers now.

It is good to see the FCA recognising the opportunity to make changes to RIOs but surprising that these are being prioritised in the roadmap, and with regulation seen as the key barrier. 

RIOs are only one section of the broader later life lending space, with the FCA’s own figures highlighting 2,317 RIOs worth £201.5 million being arranged in the first nine months of this year compared with 20,322 lifetime mortgages worth £1.63 billion. Undoubtedly there is scope for more RIOs to be advised but this should be alongside greater take-up of modern lifetime mortgages, including those that offer flexible repayment options.

Based on the customer and societal drivers identified, the later life lending market should be far larger than it is today and specialist products, with feature and benefits designed specifically for the needs of this demographic, should represent a much greater proportion of the overall mix.

It is distribution challenges that are the primary barrier to be addressed and, through effective collaboration between trade bodies and other industry stakeholders, there’s the option for changes to the wider market to drive more meaningful benefits sooner than proposed.

The need for lifetime mortgages is growing and firms should be gearing up to meet the demand now, either through building their own capability to advise in the market or ensuring they have robust, evidenced referral pathways to support good customer outcomes.