Is Equity Release Regulated by the FCA?

Excluding yourself, there are typically three parties involved with Equity Release. The Equity Release adviser, the Equity Release provider and the Equity Release arranger. All three parties have a hand in dealing with your Equity Release.

The Equity Release adviser, the Equity Release provider and the Equity Release arranger are collectively regulated by the Financial Conduct Authority with regard to Lifetime Mortgages and Home Reversion plans.

Equity Release regulation can be a complicated subject, here we’ve broken down for you how the different parties involved are regulated.

How are the parties involved with Equity Release regulated?

There are different rules and regulations specific to each party involved with later life lending through the Equity Release process. The regulations are put in place to prevent poor quality advice and ensure the customer’s financial circumstances are properly considered.

Bad advice given for Lifetime Mortgages and Home Reversion plans can cause significant harm.

The Equity Release adviser

A regulated Equity Release adviser is a person or firm who is authorised to recommend Equity Release financial products to a borrower or potential borrower.

They can advise on entering into particular regulated mortgage contracts, and, varying the terms of an existing regulated mortgage contract from 31st October 2004 as specified in article 53A of the Regulated Activities Order in the FCA Handbook.

Advisers are required to provide a detailed forecast showing how much the lifetime mortgage or home reversion plan will cost over your lifetime and to demonstrate that they’ve carefully considered your personal circumstances now and in the future.

The Equity Release provider

A regulated Equity Release provider is a firm that is authorised to enter into regulated mortgage contracts as a lender, section 61(1) of the FCA Handbook, as well as, being able to provide Home Reversion plans after 6th April 2007 as specified in article 63B(1) of the FCA Handbook.

The Equity Release arranger

A regulated Equity Release arranger is a firm or person that works to bring about Lifetime Mortgages and/or Home reversion plans.

Activities involving the lifetime mortgage market are governed by article 61(3) of the Regulated Activities Order which clearly defines what a mortgage constitutes. Also, any work done arranging a home reversion plan or making arrangements with a view to a home reversion plan is governed by article 63B(3) of the Regulated Activities Order.

Understanding how all parties are involved is crucial in making sure you get the right deal for you.

Which regulations govern Lifetime Mortgages and Home Reversion plans?

Definitions and regulations go to great length to ensure there is adequate consumer protection for people looking to conduct an Equity Release transaction.

Regulations governing Lifetime Mortgages

Regulations governing lifetime mortgages go to great length to protect consumers. There are a number of requirements:

1. A person must be of a certain age
2. The lender will not seek repayment of the loan until a specified life event has occurred
3. Unless agreed, the lender will not seek interest payments whilst the customer continues to live there.

Article 3(1)(b) credit agreement in the FCA Handbook stipulates how a lifetime mortgage credit agreement should be reached.

Regulations governing Home Reversion Plans

Regulations and definitions of Home Reversion plans clearly lay out what a home reversion plan is and how it should be administered, laid out in accordance with article 63B(3) of the Regulated Activities Order in the FCA Handbook:

1. It is an arrangement where the reversion provider buys all or part of a qualifying interest in land from an individual or trustees.
2. The reversion occupier or the beneficiary of the trust (if the reversion occupier is a trustee), is entitled to occupy at least 40% of the land in question as or in connection with the dwelling.
3. The arrangement will come to an end when the person becomes a resident of a care home or passes away.

What role does the Equity Release Council play in regulation?

The Equity Release Council does not have regulatory powers itself, those powers lay with the FCA. However the Equity Release Council is governed and regulated itself by the FCA.

The Equity Release Council sets standards of principles that all its members must abide by and these standards have made Equity Release a lot safer for consumers. One of the most notable standards is the no-negative-equity guarantee, which protects consumers from owing more money than there is in their property.

How do I complain to the FCA about my Equity Release?

You can begin the process of raising a complaint with the financial ombudsman here

If the people, or firms in question are a member of the equity release council you can also raise a complaint with them

Does the Financial Conduct Authority investigate advice being given?

Yes, Equity Release advice is regularly reviewed by the FCA. However although advice is regulated the FCA reported on the 17/06/2022 that:

“Firms must do more to ensure they are always giving appropriate advice to Equity Release consumers”

The report found that there were three significant findings which could cause harm to consumers:

1. Advice given by firms did not always sufficiently take into account consumers’ personal circumstances;
2. Consumers reasons for looking at Equity Release were not always challenged by firms;
3. Firms weren’t always able to evidence that their advice was suitable.

We know Equity Release can be a big decision for you to make, which is why we’ve teamed up with the UK’s number one Equity Release adviser and member of the Equity Release Council, Age Partnership.

The Age Partnership adviser will make sure you understand all the options available to you.