Mortgage advisers must consider the full range of later life lending options for clients aged 55 and over if they are to meet Consumer Duty obligations, according to Key Advice.
The call comes as part of Key’s response to the Financial Conduct Authority’s (FCA) Future of the Mortgage Market discussion paper, which remains open for consultation until 19th September.
The FCA launched the paper in June, noting that rules may need to change “to enable more holistic advice.”
Key argued this should include a mandatory disclosure requirement so later life customers understand the scope of advice they are receiving and are clearly signposted to further support if all mortgage options are not being considered – including lifetime mortgages.
At present, the firm warned, many advisers are failing older customers by rolling them onto similar products at the end of a fixed term, often via product transfers or remortgages, without properly assessing whether a later life product could better suit their needs.
This, Key said, is falling short of the “good customer outcomes” required under Consumer Duty.
The FCA paper acknowledged that mortgage products designed for older borrowers, such as retirement interest-only (RIO) mortgages, term interest-only and lifetime mortgages, are now increasingly mainstream.
However, it cautioned that the market risks being unprepared to meet the needs of future generations of borrowers.
Key said advisers’ recommendations for over-55s must be centred on customer needs rather than on specific product sales, especially as changing circumstances – such as income fluctuations or health issues – make flexibility vital.
Later life lending options, it noted, can provide that flexibility and improve financial resilience.
Charlotte Allen, chief risk and compliance officer at Key Group, said: “There is a growing need for advisers in the mainstream mortgage market to rethink their approach and the introduction of a mandatory disclosure requirement, for both advisers and lenders dealing with customers over the age of 55, would accelerate that change.
“The FCA should take the lead to ensure that advisers are engaging with older clients and researching a broader range of later life lending products alongside mainstream options – in the same way that equity release specialists should not default to lifetime mortgages without fully exploring affordability and the other products that may be available.
“There is a huge opportunity for mortgage advisers to grow their businesses and improve their customers’ lives by considering the full range of later life lending options with their older customers and ensuring they stay abreast of all the product innovation taking place.
“This can be achieved by expanding their own scope of advice or working with trusted referral partners.”
