Some providers are considering new products that incorporate a mandatory payment period at the outset before converting into a lifetime mortgage after a predetermined time. These new products have the working titles of ‘mandatory payment’ or ‘hybrid’ products and the FCA has amended its rules so they can be considered equity release products from the outset.  

The Council’s standards do not currently take these products into account but we have undertaken a detailed review so they can be covered.

In addition, the FCA’s review of later-life lending, in September 2023, gave rise to the need for other updates to our standards, which we have incorporated into this review.

This work has been carried out by a working group drawn from the membership and then reviewed by the Council’s adviser forum before being brought to the standards committee.

We now need to ask our members for their views on the proposed changes. These changes have been divided into two areas, product and advice. The proposed updates are shown in red below.

Respondents can remain anonymous but we invite you to provide your contact details if you are willing to be contacted about your views.

Our thanks go to all involved in this project and to our members for their continued support.

A wider review of our standards is planned for 2024.

Question Title

* 1. Please select your member type

Question Title

* 2. Do you support the following amendment?

Rule 3.8: The consumer must have the right to remain in their property for life or until they need to move into long-term care, provided the property remains their main residence and they abide by the terms and conditions of their contract, including making mandatory payments as agreed.

Question Title

* 3. Do you support the following amendment?

Rule 3.10: For lifetime mortgages, customers must have the right to make voluntary penalty free repayments once the mandatory payment period has ended, subject to lender criteria.

Question Title

* 4. Do you support the following amendment?

Rule 3.12: The product must have a No Negative Equity Guarantee (NNEG) so that, whenever the amount owing to the provider member is to be repaid from the proceeds of sale of the secured property, the amount owing must not exceed the net proceeds of sale (after deduction of selling agents’ fees, legal fees, disbursements, arrears, any interest on the arrears and reasonable costs). Provided the property is sold for the best price reasonably obtainable, the provider member shall accept the net proceeds of sale in full and final settlement of the amount owing.

Updates to the advice standards

The adviser forum and working group have also considered the advice standards, both in relation to the new product and the FCA’s September review. The key learnings and findings from the review are a priority for the Council and are reflected in the proposed update, which has a refreshed focus on income and expenditure.

The following recommendations concern all products with one additional rule specific to the new product. It is proposed that they will be carried in the Council's rules, guidance and checklist for advisers.

Question Title

* 5. Do you support these proposed new adviser rules?

1. Comprehensive details of customer’s income and any essential and  non-essential expenditure should be collected.

2. Consideration should be given to the information provided, alongside the customer’s likely future position, for example following retirement or any anticipated change in circumstances.

3. The adviser should satisfy themselves that any mandatory payments for a product are affordable to the customer.

Question Title

* 6. Do you support this proposed new guidance?

1. Assessment should be made of income and expenditure (and where necessary verified) to help determine the customer’s financial position and ability to make payments.

2. The adviser should challenge any inconsistencies in the customer’s income and expenditure.

3. The adviser should demonstrate that all alternative options have been considered, quantified and reasons for discounting documented fully in the customer’s own words wherever possible.

Question Title

* 7. Do you support the following additions to the checklist for advisers?

1. Have you fully discussed, documented, assessed and where necessary verified the customer’s current and potential future income and expenditure?

2. Where the product recommended requires regular payments, are you satisfied that payments are affordable and likely to remain affordable  to the customer and fall within their proposed budget?

Business impact

Question Title

* 8. What impact will these proposals have on your firm? Please check either, neither or both options.

Question Title

* 9. Will there be additional costs to your firm?

Question Title

* 10. Do you think the benefits outweigh the costs?

Contact preferences

Question Title

* 11. The standards will continue to evolve to ensure they remain current and relevant. Member engagement is vital in ensuring that the Council continues to represent the needs and views of its members. Please let us know if we can contact you and on what basis.

T