The FCA has highlighted failings in the quality of equity release advice provided by some firms.

The watchdog says that demand for later life lending has grown in recent years and it found the market to be working well for many borrowers, however it has raised three areas of significant concern:

• Advice given by firms did not always sufficiently take into account consumers’ personal circumstances
• Consumers reasons for looking at equity release were not always challenged
• Firms weren’t always able to evidence that their advice was suitable.

The regulator warned that some firms were not paying adequate attention to the high exit fees for equity release and the compounding impact of interest rates when comparing lifetime mortgages to other options that might be more suitable for certain borrowers.

Among the worrying examples uncovered by the FCA review were:

• Advisers failing to take account of the difference between borrowers in their 50s who are still working and those who are retired and on a fixed income when considering equity release against standard mortgages that might still be an option for the former.
• Brokers relying on Key Facts Illustration to inform customers of the long-term costs of equity release with no supplementary discussion.
• Some firms failed to explore debt consolidation options beyond equity release meaning some borrowers had short-term low-cost debts rolled into their lifetime mortgage for no good reason.
• Advisers automatically rolling fees into equity release loans without exploring whether this was in the borrower’s best interest.
• Brokers assuming that borrowers would prefer a lifetime mortgage with no monthly repayments without discussing the advantages of making interest payments for those who have surplus income. 
• Advisers recommending changes to property ownership, including removal of a joint owner who was too young to meet eligibility requirements of lenders from the title deeds, to allow equity release to take place without proper discussion of the pitfalls.

FCA executive director of supervision, retail and authorisations Jonathan Davidson says: “Deciding to enter into a lifetime mortgage is a big decision with a big financial impact for consumers.  

“In many instances it makes sense but whether it does or not depends on personal circumstances and how they might change. 

“It is therefore critical that advice offered to consumers looking at lifetime mortgages is suitable to their personal circumstances.  

“It is clear from our review that advice being offered to such consumers, including some vulnerable consumers, is still not up to scratch.

“All firms offering these products should read our review and take action to make sure consumers are receiving advice tailored to their personal circumstances.

“We’ve continued to engage with firms where we had concerns and, as part of our ongoing supervision of mortgage intermediaries, we will be carrying out more detailed follow-up work into the suitability of advice in the lifetime mortgage market.

 “If in doubt as to whether a lifetime mortgage makes sense for you as a consumer, you should explore your personal circumstance fully with your advisers or with independent sources such as the Money and Pensions Service.”