Equity Release Council members will need to discuss income and spending with borrowers as part of the advice process under new consumer protections that come into force next month.
The changes are part of the first set of updates to the Council’s standards which are designed to better safeguard borrowers.
Further updates bring the standards up-to-date with increased product flexibility in the sector and provide greater protection for borrowers taking out mandatory payment lifetime mortgages – where homeowners make repayments until they reach a specified age.
The changes follow a consultation with Council members and will be followed by further updates to the standards later this year.
Equity Release Council director of risk, policy and compliance Kelly Melville-Kelly, says: “The updates that we have announced today are just a start and we will shortly be launching a wider review and seeking input from members as well as wider industry stakeholders.
“This will be a wide-ranging refresh which will look at not only the standards themselves but how they are communicated to customers to ensure that they provide the best protection possible.”
Legal & General Home Finance chief executive Craig Brown says the lender has worked closely with the ERC on the standards, particularly those relating to its own Payment Term Lifetime Mortgage.
He says: “Our PTLM is unique in that it helps borrowers access property wealth earlier – from 50, rather than 55 – and offers a tax-free cash lump sum in return for fixed monthly interest repayments up until retirement or age 75, whichever comes first.
“This new product not only helps people access their property wealth at a younger age, but also bridges the gap for those caught between traditional lifetime mortgages and Retirement Interest-Only solutions.
“The council’s announcement today gives customers the peace-of-mind that comes with its endorsement when considering new products, but also sends a signal to the industry that product innovations such as this, rooted in customer need, are important for the sector’s continued evolution.”
