The Financial Conduct Authority’s Terms of Reference for the Later Life Mortgage Market Study shows positive intent in addressing distribution silos impacting customer outcomes in later life lending, according to Key Equity Release.

In response to the market study, which closed for consultation on 17 April, Key has called for all product providers and distributors to immediately expand awareness of product options and increase access to appropriate advice for customers looking to release equity and/or manage existing mortgage debt in later life.

Key says it welcomes the focus on the ‘the provision and distribution of lifetime and RIO mortgages’ and the benefits they bring.

However, the lender believes breaking down the structural and behavioural barriers which regularly sees mainstream mortgage advisers, wealth managers and IFAs fail to appropriately consider all later life lending options for customers over the age of 55, is the answer to unlocking better outcomes for customers.

Key estimates suggest that combined new mortgage lending, remortgages and product transfers involving those over 55 could total approximately £60bn per annum.

It says lifetime mortgages are still regarded by too many advisers as a ‘last resort’, with others having little awareness at all of the options now available, meaning that currently these products are only being used by a small percentage of those customers for whom they could support good outcomes.

The lender highlights that today’s equity release market is well positioned to meet the growing needs of over-55s with the market achieving annual lending of more than £6bn in 2022.

Meanwhile, recent product innovation now means that modern lifetime mortgages enable customers to pay all, some or none of the interest as well as many products offering limited and no early redemption charges.

Key acknowledges that there is room for further product innovation in the later life lending sector but this requires distribution silos to be addressed, alongside the need for specialist advice models to continue to evolve to ensure that all options are considered and that commercial drivers don’t negatively impact customer outcomes.

However, it argues, that modern lifetime mortgages, when well advised, already deliver excellent value.

While Key says it is right that the functioning of the ‘as is’ market for lifetime mortgage and RIOs is scrutinised under the Market Study, it states that the larger opportunity to improve outcomes lies with the vast number of over 55s who remain in mainstream mortgage products.

Key Equity Release chief executive Will Hale says: “The direction of travel being pursued by the regulator is clear and all advisers must act now in order to not be left behind. Moving later life lending from a niche to the norm requires opening up distribution.”

“All advisers need to adopt a more holistic perspective and consider referrals to trusted specialists in situations where their own qualifications or scope of advice limit their options.”

“For both mainstream mortgage advisers and wealth managers/IFAs, having this broader field of vision will see better outcomes achieved for many more customers in later life.”

“Similarly, banks, building societies, life companies and those operating targeted support models should make it their responsibility to ensure customers are aware of the later life lending options that sit beyond their own product ranges and signpost to appropriate advice.”

“The regulator should be applauded for the leadership and vision it has shown in identifying the greater role later life lending can play in supporting the needs and wants of older customers.”

“The terms of reference for the Market Study along with the parallel focus on holistic advice evidence that the FCA is committed to deliver material change. It is time for the industry to step-up and to take action now to improve awareness and access to the full range of options available.”

“This is an exciting, moment in time opportunity for stakeholders to come together and collaborate to ensure the later life lending sector is positioned to realise its considerable potential.”