On 29 June 2022, the FCA published its Dear CEO letter setting out its supervisory strategy for lifetime mortgage providers.

The FCA has reviewed the key risks of harm for lifetime mortgage providers, their consumers and the markets in which they operate as part of its approach to supervision. This follows a previous review, and letter to lifetime mortgage providers in October 2020.

In this latest Dear CEO letter the FCA provides an updated view of the current key risks of harm and outlines its expectations of firms. It also provides an overview of its supervisory strategy and programme of work to ensure that firms are meeting the FCA’s expectations, and harms are being appropriately remedied.

The Dear CEO letter also discusses the rising cost of living. In particular, the FCA raises its concerns that consumers in this portfolio who are facing  financial stress may be more susceptible to the purchase of unsuitable equity release products. The FCA expects firms in the lifetime mortgages portfolio to consider how the cost of living crisis is likely to impact consumers and take the necessary steps to support consumers and mitigate harm. The regulator states that it is important that firms in this portfolio meets the standards set out in the FCA’s Principles/Rules/Guidance and, in particular, that appropriate attention/resource is given to the treatment of those customers in vulnerable circumstances. The FCA considers that its Tailored Support Guidance for mortgages, consumer credit and overdrafts which was issued to address exceptional circumstances arising out of coronavirus, is also relevant for borrowers in financial difficulties due to other circumstances such as the rising cost of living.