The regulation of equity release lending

Generally used to describe the ability to borrow money against the equity of a property, equity release lending saves homeowners the trouble of having to go through the process of selling and downsizing.

Usually appealing and only available to those over the age of 50, this option has no fixed duration and normally runs for the rest of the borrower’s life.

There is often a minimum amount that can be borrowed, although this can vary between lenders and the type of scheme that they offer. Like all secured lending, equity release products are regulated by the Financial Conduct Authority (FCA). Each lender must adhere to strict regulation guidelines, and as a lending professional, you must study and obtain a pass in the relevant Certificate in Regulated Equity Release (CeRER).

Post MMR

April 2014 saw the Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review (MMR), which was conducted by the FCA. It was implemented to ensure that lenders were adhering to regulation already in place, and that they were lending responsibly.

As part of the MMR, it has become compulsory that any lender who offers an equity release scheme provides it on an advice basis. This means that as well as achieving the relevant qualifications, the lending professional must recommend the most appropriate product dependent on the individual’s circumstances.

Some equity release products require the borrower to maintain a monthly interest payment for the loan, and in these cases, with the new regulation, lenders must also assess a customer’s income to check that they can comfortably maintain the repayments. Income proofs such as bank statements or pension statements, along with confirmation of outgoings would be requested as part of the application process.

Equity release providers and the FCA

The FCA is there to ensure that any equity release lending is approved correctly. It asks that all promotions and product brochures are clear and fair, and the information contained within is not misleading and covers the following points:

• Particularly with lifetime mortgages, the lender must display the annual percentage rate (APR) wherever price information is shown.

• Equal attention must be paid to both the advantages and disadvantage of the scheme’s features.

• The lending professional must assess and advise if entering an equity release scheme would affect benefit entitlement.

• All fees must be discussed and quoted to the customer prior to any application being made.

In order to maintain compliance, advisors also need to confirm what schemes they can recommend, whether they are tied to a specified lender or can access the whole market, and finally let you know about applicable fees.

During an interview with a customer, advisors will ask about personal circumstances – their income and where it comes from, as well as regular monthly outgoings. They will undertake an affordability calculation, which will vary between lenders by following these set procedures, before looking at the products available and making their recommendation.

Having completed the CeRER training and gaining accreditation, you will be ready to work with customers, keeping within the FCA guidelines. Customers will have confidence in your abilities and trust the recommendation you make.



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