The FCA is seeking feedback on whether providers operating in the mortgage space are currently meeting changing consumer needs from different age groups.
In its latest paper Intergenerational Differences, the FCA said “home ownership rates declined in the last decade, especially for those aged 18 to 34”.
“Many young people would still like to buy a property, but are finding it increasingly difficult to do so. In the last 30 years house prices have increased more than wages. House prices in real terms have increased by 259% during this time, while wages increased by only 68%.”
The FCA said labour market changes may also be having significant effects on borrowers’ relationships with the sector. Those who work in jobs providing less reliable and stable sources of income may find it harder to pass affordability assessments, which is also relevant to consumer credit. In addition, young people may tend to join the labour market, than go back into education to enter the labour market again later – at times more than once. These consumers may require greater flexibility in their mortgage and credit products, the FCA added.
Specifically on the issue of affordability, the FCA said firms have offered innovative products designed to enable wealth transfer between generations. For example, ‘family assist’ mortgages are designed for parents and grandparents to help family members who don’t have the level of deposit that lenders typically require. There have also been a range of products designed for similar purposes such as guarantor mortgages and family offset mortgages. However, internal analysis of Product Sales Data shows that these products still represent a small portion of the market.
Looking at later life, the FCA said equity release is a small but growing section of the market, but the main form lifetime mortgages made up 1.5% of all mortgages arranged in 2016.
“While this market remains small, this represents significant growth of 12%pa between 2012 to 2016. This tells us that consumers, especially those in later years, are increasingly looking to draw on housing wealth. One possibility would be turning to mortgages for purposes other than buying a property – they may turn to mortgage type products to maintain living standards and/or help their relatives.”
The full paper can be viewed here
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