Mortgage advisers who offer clients access to retirement interest-only (RIO) mortgages but do not have an equity release ‘outlet’ could be creating potential problems in the future, said Hodge Lifetime national account manager James Young.
Speaking at the FSE Wales conference yesterday, Young responded to a question on whether mortgage advisers dealing with later life borrowers without access to equity release, could potentially encounter problems in the future, if those clients are deemed more suitable for equity release.
“The rules around this for advisers are quite specific,” Young said.
“Advisers recommending a RIO product have to acknowledge and point out the equity release options that area available to clients. Where there could be a problem for advisers is when they do not have any equity release ‘outlet’ at all; that is advisers recommending RIO and not looking at equity release, and also vice versa. I would certainly advocate that advisers get their equity release qualifications and authorisation.”
Young further brought attention to the gap that currently exists between mortgage intermediaries and equity release advisers, stating that “the Mortgages Market Interim Study highlighted this”.
“Currently there are very few firms that can do both and having advice from both sides of the market is going to be increasingly important,” he added.
According to Young, this could prove to be “even more valuable” as Hodge Lifetime anticipates those customers initially taking our RIO products would eventually transition into equity release. He said there were a number of reasons as to why an equity release product might be a “step too far” for clients initially, citing the LTVs available as one reason why RIOs could be more suitable.
Furthermore, he said that the later life lending market was one that advisers should embrace as over a quarter of the UK population were over 55 years old, there was a growing need to access equity within a property, and an anticipation that the “could represent over £100bn of equity release and later life lending in the next decade”.
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