FCA Equity Release Advice Review

The Financial Conduct Authority (FCA) has initiated a review as demand for lending in later life and equity release increases to make sure the market works well for consumers.

Equity release allows consumers to benefit from the stability of a long-term fixed interest rate and unlock wealth from the value of their home which may be their only asset and have the option of no monthly interest payments.

The FCA is looking to ensure firms give the appropriate advice but have identified 3 areas of concern that increase the risk of harm to consumers:

• Firms were not always able to evidence that their advice was suitable.
• Advice given by firms did not always sufficiently consider a consumer's personal circumstances.
• Consumers reasons for looking at equity release were not always challenged by firms.

Equity release is one of the most important and long-term financial decisions people make in later life.  The costs of compounding interest over a long period can make equity release an expensive way to meet short term borrowing and the costs of ending these contracts or repaying early can be significant.

The FCA’s review is part of exploratory work on lending in later life and the borrowing opportunities for consumers 55years and over, but their concerns that advice had been given to consumers to take out equity release was not always in the best interest of the client.

Comment

A review of the equity release market and suitability of advice to vulnerable adults is long overdue.