CML responds to second FSA review of lifetime mortgages

The Council of Mortgage Lenders today welcomed the FSA's findings from its follow-up work on lifetime mortgages that product providers (lenders) "now generally have in place the overall systems and controls to enable their sales forces to give an acceptable quality of advice to consumers".

But it is clear that issues still remain among smaller intermediary firms who "dabble" in lifetime mortgages on an occasional basis.

The CML emphasises that there are excellent tools available to assist compliance. By following a sales process based on the CML's good practice notes and the use of Fintal (specialist software that calculates the effect of a lifetime mortgage on an individual's tax and benefits), advisers should be able to comply painlessly with the rules.

The CML believes that the FSA needs to target its communications on intermediary firms that "dabble" in lifetime mortgages, to deter them from remaining in this market unless they improve their compliance standards.  And the FSA should consider making the specific lifetime mortgage qualification compulsory for everyone selling these products.

Commenting on the findings, CML senior policy adviser Laurence Baxter said:

"Our members who offer lifetime mortgages have put in considerable effort to improve their sales practices, and introduce compliant systems and effective staff training.

"We look forward to discussing with the FSA what more the regulator can do to discourage "dabblers" and improve overall compliance. The tools that we and the other trade bodies have created, despite being highly effective where they are being used, are evidently not reaching all those advisers who need them. This suggests that work is particularly needed to target communication to intermediary firms whose lifetime mortgage business is only a minor sideline."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.6 million mortgages in the UK, with loans worth over £1 trillion.

2. The CML's good practice notes were drawn up with key lifetime mortgage providers and was discussed with the FSA, these are attached below along with information on the lifetime mortgages and benefits calculation and advice system.