Later life lending products have been changing to meet customer demand, according to Key Advice, a UK equity release adviser.
The Financial Conduct Authority’s (FCAs) recent Mortgage Market Discussion Paper pointed to a need for innovation in the sector, saying it does not want to be “creating a barrier to innovation” and wants “firms to feel confident when launching new offerings.”
Key Advice said products such as Omni from more2life have made it possible for advisers to offer loan-to-value (LTV) ratios up to 55.3%, higher than those previously available.
The product also accepts applications up to the age of 89 and for unusual properties, including complex cases that were often rejected in the past.
Additionally, Key Advice said these changes show why advisers, including mainstream mortgage advisers, wealth managers and equity release specialists, need to have detailed conversations with clients about their options.
The firm added that more flexible lifetime mortgages now include shorter early redemption charge (ERC) periods and options for ERC-free repayments, which can help customers manage borrowing costs.
Products still include the no negative equity guarantee, which means estates are not left with debt exceeding the value of the property.
Rachel East, senior director at Key Advice, said: “Lifetime mortgage lenders are increasingly responding to what advisers are telling them their customers need and the expansion of LTVs and broader lending criteria are top of the list.
“We have to turn away many customers who have a borrowing requirement above the maximum available, and for whom affordability barriers mean mainstream products such as RIOs and TIOs are unavailable, so innovation is helping later life lending advisers to support more older borrowers achieve good outcomes.
“It is important that mainstream mortgage advisers and other financial advisers are aware of the innovation in the later life lending sector so they can identify customers for whom these options may be appropriate and potentially refer them to a specialist.
East added: “The FCA has made it clear that the later life lending market needs to evolve so it can help more people and lenders are responding with the innovation that delivers that.
“Irrespective of the scope of the advice they offer, in order to meet Consumer Duty obligations, advisers need to be having comprehensive conversations with customers on all of their options and have trusted referral relationships in place in order to deliver good outcomes.”
