Blackwell urges FCA to reconsider silo approach to later life lending (National Later Life Adviser Conference)

25 June 2019

Former FCA Mortgage Policy Manager, and industry consultant, Lynda Blackwell, has suggested the regulator needs to review its approach to later life lending, particularly the current placement of Retirement Interest-Only (RIO) mortgages within its mainstream mortgage rules.

Blackwell was speaking at today’s National Later Life Adviser Conference, in association with the Equity Release Council, which is taking place at the Madejski Stadium, Reading.

Talking about how the FCA approaches the later life lending market, and the disconnect between the rules around RIO sales and advice, compared to the “thorough and comprehensive set of rules” for equity release, Blackwell said: “The regulator is causing real problems in the silo approach it takes to markets. The RIO situation really brought this home to me, especially given there is the same need for advice and support with RIO as there is with equity release, but it brought a residential approach to the rules [for RIO].”

Blackwell - regarded as one of the chief architects of the Mortgage Market Review (MMR) – said the FCA’s approach to RIO was founded on it being designed to “help the big banks with a problem it had”, namely how it helped customers coming to the end of interest-only mortgage deals. Blackwell said the FCA had been lobbied very hard by those big banks to adopt such an approach.

She argued that this however was “cooking up a problem” in the gap that exists between RIO and equity release products and urged the regulator to “think about this again”. She said: “The regulator needs to have a long, hard look at what this looks like from the consumer’s perspective.”

Blackwell also highlighted the issue of affordability and urged both product providers and advisers to pressure the regulator in terms of the difficulties some older consumers can encounter. “Many older people will have no chance of meeting the affordability requirements in this area,” she said. “The FCA needs to look at this again, and the industry needs to lobby it to help with innovation in this part of the market. It has got halfway there with RIO, but some maneuvering is needed around the income requirements. We probably need to see a capital-based approach to affordability not just income-based.”

Stuart Wilson, CEO of Answers in Retirement Group – which today announced a rebrand of its businesses – agreed that the industry had to make its voice known to the regulator. “As a business we issue formal responses to all FCA consultations in this sector but as an industry we need to pressure the FCA on behalf of our customers,” he said. “There need to be a recognition that customers are not coming from a siloed basis.”

Will Hale, Chief Executive Office at Key Advice, agreed: “We need more constructive dialogue with the regulator. It hasn’t truly embraced the changes in the industry around product design and flexibility, and therefore we need to educate the regulator on this, but also that advice is aligned to bring about the best results for the customer.”