A review of later-life mortgage firms by the UK’s FCA has prompted the removal or amendment of almost 400 misleading promotions. The regulator is working with the largest firms to improve their advice processes.

A later-life mortgage is the most popular type of equity release catering for homeowners who want to release money tied up in their homes to help meet later-life needs. These complex products are 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. 

The review looked at firms responsible for around half of all lifetime mortgage sales. It found in many cases advice did not meet the standards expected. For example, a lack of evidence that sufficient consideration of consumer’s individual circumstances had been given and advice lacked discussion of alternatives.  

Personalized advice

The FCA has required those firms which fell short to improve the quality of their advice. The FCA is driving significant improvements in processes to ensure advice is personalized and shows consideration of customers’ circumstances. The majority of firms in scope of the review also changed how their advisers are incentivized.  

The FCA set out, in its 2022/23 Business plan, work to ensure the later-life mortgage market is working well, including following up on earlier findings about poor-quality advice, and checking that standards among intermediaries have improved.

Other lifetime mortgage advisers must pay close attention to the review’s findings and act immediately where they need to. 

Financial promotions

Financial promotions can significantly influence consumer understanding of the later-life lending market, and knowledge of the options they have available. Despite clear and long-standing rules the review found many: 

• came with inaccurate or misleading promotions;
• had product benefits being highlighted without any balancing description of the risks;
• featured examples of firms using their FCA-regulated status in a promotional manner. 

Comply with Consumer Duty

Sheldon Mills, FCA Executive Director of Consumers and Competition, said: “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.” 

With the Consumer Duty now in force, all firms should be focused on putting consumers at the heart of their business and delivering good outcomes. Firms should assure themselves that they are complying with:

• the Consumer Principle, which requires firms to act to deliver good outcomes for retail customers;
• the cross-cutting rules for firms to act in good faith towards retail customers, and should avoid causing foreseeable harm to retail customers, and enable and support retail customers to pursue their financial objectives 
• outcomes rules on the design of products and services, price and value, consumer understanding and consumer support.