Altering mortgage affordability rules would assist more lifetime mortgage customers to make interest repayments before moving to a roll-up arrangement.
This is the view of The Equity Release Council, which is wary of the amendments to the Mortgage Conduct of Business.
Changes
Amendments to the Mortgage Code of Business rules following the MMR mean that lifetime mortgage contracts that permit but not require consumers to pay interest for a length of time are subject to requirement of providers in order to gauge their affordability.
The Equity Release Council argues that this is despite the fact that payments of interest are already optional. As a result, customers will not be in danger of losing their homes as a result of not keeping up with interest payments.
This means that some customers who would have taken out a lifetime mortgage with the option to repay interest for as long as they wanted may now not pass affordability requirements. In addition, these customers could be reluctant to subject themselves to any assessment process or to be offered alternative products.
Equity Release Council challenges lifetime mortgages
Calls
In an appeal to the FCA, The Equity Release Council has asked if a relaxation of rules intended for residential rather than lifetime mortgages would assist more consumers looking to unlock their housing wealth, while saving a greater amount of equity in their property.
Additionally, the Council added that a relaxation could support existing providers’ ability to further their product range.
‘We welcome the proactive decision by the FCA to review whether there are any barriers to competition in the mortgage sector,’ said Nigel Waterson, Chairman of The Equity Release Council. ‘Retirement lending is a crucial part of this and there needs to be careful consideration of the factors which differentiate residential and lifetime borrowing,’ he continued.[1]
Waterson went on to say that, ‘as part of our wide-ranging input we highlighted that revisiting affordability rules may help more consumers to make use of options already offered by equity release providers in later life, as well as encouraging more new entrants to the market. There is a growing recognition that equity release has an important part to play in the planning of funding for later life and we look forward to working together with the FCA on the back of its findings.’[1]
[1] http://www.propertyreporter.co.uk/finance/lifetime-mortgage-rules-challenged.html