Later life mortgage market to come under scrutiny in FCA study
Image: FCA
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The Financial Conduct Authority will conduct a later life mortgage market study, to understand if change is needed to enable the lifetime and retirement interest-only mortgage sector to meet consumers’ future needs. Comments can be sent until 5pm on 17 April.
The FCA published the terms of reference for the study on Friday. Focusing on provider entry and growth, and on effective consumer decision-making, it will gather data, speak to firms that provide these products as well as to those that do not – to understand why – and undertake consumer research.
The regulator stressed that future retirees will need to rely on their housing wealth to a greater extent, as the government has suggested that 43% of people are undersaving for retirement, while the majority of the UK’s property wealth is held by the over-55s. In addition, more people will still be paying off a standard mortgage when they retire due to higher house prices and interest rates.
“For many, retirement is a balance sheet issue, rather than simply a pensions one – involving total wealth management across pensions, housing, and other savings,” said FCA chief executive Nikhil Rathi.
Speaking at the JP Morgan Pensions and Savings Symposium 2026 on Friday, he said products like lifetime mortgages and retirement interest-only mortgages may become more prominent parts of the retirement landscape.
“This raises important questions,” he said. “How straightforward is it to understand the trade-offs between pension drawdown and borrowing to utilise housing wealth? And does the market currently provide the advice and support people need to navigate those choices with confidence?”
Given the growing pressures on financial security at older ages, the FCA said the market study sits within wider work aimed at driving better retirement outcomes, including the introduction of targeted support – going live from 6 April – and the new Pensions Commission.
“We will consider how we can help [the market] adapt and, where we find change is needed, we’ll focus on implementing solutions that support competition and innovation, and let consumers easily access products and services which meet their needs and provide fair value,” it said.
The FCA might also consider if any action is needed that is outside of its remit and if so, could make recommendations to other bodies.
‘Not a solution on its own’
Allowing easier access to housing equity in later life could help some people who are struggling and is worth exploring, said independent policy researcher Daniela Silcock, but she warned that it is “not a solution on its own”.
“Those who benefit are often people who already have higher wealth, and the amounts released can be lower than expected,” she observed. “Like early access to pensions for housing, closer links between property and pensions raise risks. They shift focus away from providing stable, adequate retirement income. The central issue is how to ensure people have sufficient income in later life through state and private pensions, rather than relying on housing wealth to fill gaps.”
What does the market look like now?
Last year, about 27,000 lifetime and 3,000 retirement interest-only mortgages were advanced in the UK, with a value of £2.16bn and £282m respectively, the regulator said. The median age of consumers taking out these products was around 71, and the median property value ranged from £290,000 to £350,000, with a median loan-to-value ratio of about 15% for lifetime mortgages and 27% for RIO products.
The FCA noted that most lifetime products are funded by the insurance sector, particularly to match annuity liabilities, with other sources of funding being pension funds, reinsurers, and private credit funds. RIO mortgages are mostly provided by deposit-takers, including some building societies.
The vast majority of consumers who take out a lifetime or RIO mortgage do so via an intermediary, according to the FCA. While lifetime mortgage customers must receive advice before taking out a product, RIO mortgagees do not. They are still mostly advised, but about 1 in 10 are not.
The FCA is already reviewing its RIO affordability guidance and will consult in the first half of this year on any proposals, while it is also considering the future of holistic advice, which it says it will run “in close alignment” with the market study. Both are taking place as part of the regulator’s Mortgage Rule Review, aimed at relaxing mortgage lending standards.
