Almost 400 misleading promotions by later life mortgage firms had to be scrapped or amended, following a review by the Financial Conduct Authority.
The City watchdog’s study looked at firms responsible for around half of all lifetime mortgage sales and found that “in many cases, advice did not meet the standards expected”.
It says: “For example, a lack of evidence that sufficient consideration of consumer’s individual circumstances had been given and advice lacked discussion of alternatives.”
The body points out that equity release deals are complex products, “often sold to customers with a higher risk of being in vulnerable circumstances so it’s essential they are fully informed and receive suitable advice”.
It adds that other lifetime mortgage advisors “must pay close attention to the review’s findings and act immediately where they need to”.
FCA executive director of consumers and competition Sheldon Mills says: “Releasing money tied up in your home later in life is a big decision and can have a financial impact on consumers and their families well into the future.
“Our review led to the largest later life mortgage firms making improvements to their sales and advice practices, and almost 400 promotions have been removed or amended where firms have identified issues with them.
“We expect all firms to assure themselves they comply with existing rules and guidance and higher standards under the consumer duty.”
LiveMore chief executive and founder Leon Diamond welcomed the FCA report, released today and conducted last year,
Diamond says: “The effect of compound interest on a lifetime mortgage is significant, especially in a high-interest-rate environment, making this form of finance expensive if a mortgage is held for many years.
“So, if a standard mortgage is affordable, that is usually the best outcome for the customer and there is an easy way to find that out.
“We are firmly of the view that an affordability assessment should be undertaken, in all cases, before any decision is made about going down the route of a lifetime mortgage.
“A fundamental part of an advisor’s role is to fully understand the income and outgoings of customers.
“This provides a clear picture of whether they can afford monthly mortgage repayments and should be the first option to consider.
“If an interest-only or a capital and repayment mortgage is not affordable then a lifetime mortgage could be the second option.”
Equity Release Council chief executive Jim Boyd adds: “We share the regulator’s commitment to putting customers first and ensuring they are fully informed and advised about their options.
“Its findings will inform our ongoing standards-setting work to help raise and reinforce best practice consistently across the sector.
“The council and our members are undertaking significant work to reinforce advice standards and ensure clear customer communications.
“We wholeheartedly support the new Consumer Duty and will continue to work with the regulator, members and wider industry to take every opportunity to improve customer experiences.”
