The Financial Conduct Authority (FCA) has decided allow lifetime mortgage lenders to apply for a rule waiver to allow them to ‘switch off’ affordability assessment for borrowers offering interest-charging lifetime mortgages that can convert to roll-up mortgages.
The move has been warmly welcomed by the Council of Mortgage Lenders (CML), which called for it in its retirement borrowing report in December 2015.
Paul Smee, CML director general, said: “This may look like a small change, but it is a really significant one that should allow the lifetime mortgage market to develop in a far more sensible and consumer-friendly way. It removes one barrier to the provision of sensible, safe and worthwhile lifetime mortgage products.”
Nigel Waterson, chairman of the Equity Release Council, said: “We are delighted that the FCA has decided to make a change to mortgage affordability rules when applied to lifetime mortgages. This has the potential to help more consumers make use of options already offered by equity release providers in later life and encourage further innovation within the market.
“We have been lobbying on the issue of affordability for lifetime mortgages for some time, and as part of our response to the FCA’s call for inputs at the end of 2015 and I am pleased that they have listened fully to our concerns. The optional payment of interest within a lifetime mortgage is different to that of a residential mortgage with the opportunity for consumers to switch to roll-up when they wish.
“This change highlights the growing recognition that equity release has an important part to play in the planning of funding for later life and we look forward to continuing to work with the FCA in the future.”