The FSA’s approach to equity release is baffling, argues Peter Welch, head of sales and distribution at Bridgewater Equity Release
As we have moved into a new year, it’s quite clear that the level of debate around the Mortgage Market Review (MMR) has been pushed up by at least a couple of notches. Many believe the FSA has placed itself between a rock and a hard place in terms of what it would like to do and what the current market would be able to accept. Clearly, there is significant political pressure being made to bare because the Coalition Government can well do without any further measures which dampen down an already fragile mortgage and housing market.
There is much to be said for the argument that leaving the mortgage market as is for the next few years would be in everyone’s best interests, however one suspects that the FSA is too far down the road with MMR to backtrack all the way to the start. That said, it appears from various public pronouncements that the MMR proposals from the regulator are truly consultative rather than being the done deal that many assumed them to be when first published.
In a very true sense, we have perhaps not seen the mortgage market so united for quite some time. Many lenders and advisers have been quite strident in their criticism of some of the MMR proposals and, if the FSA is receptive, then one suspects that the next documents to be published will be much different from those early drafts. Indeed, one of the other major issues of the MMR appears to be its timing – when are we likely to see the measures become part of the final rules? That is a major question – one again suspects that the recent announcement in terms of putting back the approved person regime responsibilities for mortgage advisers, could be a signal of further ‘timetable loosening’ around MMR. We should also not forget that we will probably have a different regulatory structure by the time MMR is on the agenda for implementation.
In terms of the equity release market, the last MMR paper on distribution and disclosure was hardly comprehensive. In fact, as Simon Chalk of LaterLiving has already eloquently pointed out, the FSA appear to be missing a trick with its approach to equity release advisers and their responsibility to offer a full service based on all the available consumer options. It still remains a mystery why equity release advisers are able to only provide advice just on lifetime mortgages or home reversion plans, and are not required to cover off both product sub-sectors.
The FSA require that advisers need only disclose the scope of their service in each market sector, so effectively the adviser can say, “I only cover lifetime mortgages’. What happens next is purely conjecture but I would suggest the adviser will point out that the majority of equity release products taken out to date have been lifetime mortgages
