The FCA is set to bring back retirement interest-only mortgages to help older borrowers, according to a consultation paper.
The regulator says it has found a regulatory barrier to helping older borrowers with maturing interest-only mortgages and those wanting to release equity from homes without interest roll-up.
The FCA lumped retirement interest-only mortgages together with lifetime mortgages as part of implementing the Mortgage Credit Directive, effectively calling both lifetime mortgages .
The FCA is now proposing to split the two sorts of loans out again.
The two products differ, mainly because pure retirement interest-only mortgages have no interest roll-up, require a less detailed sales process and need less advanced qualifications to sell.
At the time of the MCD there were no retirement interest-only mortgages on the market.
But as a wave of interest-only mortgages have neared maturity since the MCD was implemented, firms have been calling on the FCA to let them sell retirement interest-only loans again.
Firms told the FCA the classification was a barrier to them providing these types of mortgages.
The FCA consultation says: We are revisiting this position because it may be restricting consumer access to retirement interest-only mortgages. For example, firms may be reluctant to complicate systems and staff arrangements set up for standard mortgage lending.
The regulator adds: Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages. In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest.
Consumers are also more likely to be familiar with the product features of a mortgage involving interest payments.
But the regulator adds that it is proposing to add extra strings to any reintroduction of pure retirement interest-only mortgages.
For example, the FCA wants to amend MCOB rules on acceptable repayment strategies to include the sale of a property when certain life events occur.