The Equity Release Council [ERC] recently launched an independent report titled ‘Later Life Lending: Great Expectations’. Constructively, the report recognises the historic problems of equity release, acknowledging that products such as shared appreciation mortgages and investment backed home income plans “continue to cast a long shadow over the market today”. However, despite the statutory regulation of equity release lending only commencing in 2004, it is clear that the sector is in a very different place today.
Analysing issues of the past can often help to negotiate a route to a better future and the ERC report recommendations will all help to eliminate any legacy issues that remain. Examples include working with government, revisiting regulation, better adviser education and standards, and raising market awareness.
As with previous waves of equity release products, the sector is currently seeing significant growth. The ERC report states that equity releases are expected to show totals of over £6bn for 2022 and predicts lending of £12bn by 2030. That growth is driven by the combined effect of house price inflation and the cost-of-living crisis, which is spawning a new generation of asset rich and income poor homeowners.
Lenders in the later life market, and those buying lifetime loan portfolios, are acutely aware of the regulatory challenges they face. The FCA was critical of equity release sales and advice processes four years ago, then last year it issued a ‘Dear CEO’ warning letter to providers, and now Consumer Duty requirements are throwing up another unique set of challenges.
Governing boards, responsible for Consumer Duty implementation, are seeking additional independent oversight to ensure that assessments are robust, justified and appropriately documented. Give us a call to see how we can help you improve governance, risk assessments and oversight within any lending sector.