In a new report, the CML demonstrates that the issues around lending to older borrowers are complex and interconnected. The overarching message is that improving this market in a meaningful way requires significant collaboration both inside and outside the mortgage industry.
However, it is clear that the will to improve this market exists and the CML says that one of the most significant achievements of the work to date goes beyond the production of this report itself, and lies in the fact that so many different participants have come together with a common will to address the issues.
Those involved range from mainstream lenders and lifetime mortgage providers, from across the spectrum of CML membership, to pension providers, financial advisers, compliance experts, groups representing older customers, retirement housing providers, think tanks, other trade bodies, and regulators.
The report follows the publication last month of externally commissioned research on the demand for retirement borrowing and identifies a range of next steps and calls to action.
These include continuing to work with the intermediary sector towards a more seamless advice framework. In particular, there needs to be work to identify how to improve ‘hand-off’ arrangements between different advisers when this would best serve the customer's individual needs.
There ought to be monitoring of emerging evidence about how pension freedoms are interacting with the mortgage market, including whether access to pension pots is feeding through to some customers repaying their interest only mortgages, for example. This knowledge can be used to inform future action, the report says.
It will also involve exploring the potential for a market in the 50 to 75 age group for a product that can flex between capital repayment and interest only rollup over time, and also the potential for further product innovation for the 65 to 74 age group.
The CML is calling on the Financial Conduct Authority to consider addressing how regulation could encourage a more holistic approach to mortgage, lifetime and investment advice in the round, which is what many older borrowers really need.
Also to look at how different reasons for borrowing should be reflected in sales channels, for example health may sometimes be even more important than age in determining the quality and suitability of products and the sales advice that accompanies them.
The report says there needs to be a standard definition of retirement and some of the Mortgage Conduct of Business rules would need to be changed to allow, for example, for a lifetime mortgage to be an acceptable repayment strategy for interest only mortgages.
On top of this the CML is asking the Treasury to consider introducing tax relief on professional advice received at retirement, to encourage take-up, and ensuring that the Financial Advice Market Review is mindful of the need for joined-up, multi-disciplinary advice for older consumers.
It adds that it would be useful to draw on how other governments in an international context have sought to address the housing and borrowing needs of older borrowers, and consider whether state- backed guarantees of the type used in the US and South Korea might be worth exploring.
‘There is no silver bullet to address the complex issues involved in the housing and financial needs of older borrowers, but it is hugely significant that so many willing participants from across the mortgage industry and beyond are now collaborating to try to put this jigsaw together,’ said CML director general Paul Smee.
‘We should push forward on the more straightforward issues such as improving advice hand-offs, using the Pension Wise trigger point to address housing and debt issues, focusing on good product design, and a regulatory focus on avoiding negative unintended consequences on retirement borrowing,’ he pointed out.
‘A truly holistic approach will take longer to emerge. But there is enthusiasm to work together to address the issues. We must maintain this momentum. Through collaboration we should aim for consistently good advice, sensible housing solutions, and products that offer the financial outcomes that many older consumers are looking for, without disproportionate risk to lenders and advisers,’ he added.
