FCA mortgage market review/The launch of the Fairer Finance Retirement Compass

Speaker A: Foreign.

Speaker B: Hello and welcome to the latest episode of the Fair Finance Podcast. I'm your host, Eve McGrady. This week we're going to be taking a look at the later life lending market and discussing Vera Finance's new research revealing which groups of people stand to benefit the most from from using their housing wealth in retirement. With a growing number of people approaching retirement with inadequate pension provision, housing wealth could be the key to unlocking a better standard of living in later life. But not everyone is keen on the idea of using their house. We'll get into the detail of our findings in the second half of today's show. But first up this week we're going to discuss the FTA's latest mortgage market review consultation, which looks to help more people get a foot on the housing ladder. Uh, although it's now almost 18 years since the financial crisis, many of the tighter lending rules that followed have not been in place for much more than a decade. So are these changes likely to be the trigger for a rise in repossessions or are they sensible readjustments to rules that went too far? As ever to discuss all the detail with me are my colleagues James Daley.

Speaker A: Hello.

Speaker B: And Tim Hogg.

Speaker C: Hello.

Speaker B: So Tim, you've been reading the FCA's consultation paper. So what are the main changes that are being proposed here?

Speaker C: So the FCA is proposing a series of small tweaks who can borrow money through mortgages. Uh, and these tweaks are to a number of different types of mortgage and a number of different types of borrower. So they want to uh, make it easier for people with variable income, such as self employed people, to be able to borrow money. So a lot of self employed people don't get a regular salary every month. However, over the course of a year they might get enough money in order to repay the mortgage. Um, and at the moment that is challenging for self employed people to get mortgages, but the FTA wants to make it easier. So where the barrier is regulation, maybe that will be loosened slightly. Obviously it can be challenging because some of that variableness just indicates a higher level of risk. Maybe next month they won't get paid as much through their business and therefore they might not be able to repay. So there's that element to it. But hopefully uh, the end result would be more self employed people taking mortgages that they can afford. Um, they also want to make uh, it easier, uh, uh, for people with uh, poor credit histories to get a mortgage. So we're talking about people who've uh, had a poor Credit history, but that is in the long distant past. So maybe you had some issues 15 years ago. the moment the lender might say, well you know, the FCA wants us not to lend so much to people like you. However, the FCA is like, no, hang on a minute. If it's 15 years ago and they're actually now fine and they've got a stable job, then we can lend to them.

Speaker A: Well, and I think m more to the point, um, you know, some lenders will say, yes, we, we are happy to lend to you, but we're going to count you as credit impaired. Uh, when actually you know, this was quite historic. And so then you just end up paying a lot more interest. You know, I think in the report it says the, roughly speaking, um, subprime mortgages are uh, about 50% more expensive. So um, you know, obviously, um, that can end up being uh, an awful lot of extra interest if you're borrowing, especially in an interest rate environment like this.

Speaker C: And then there's also interest only mortgages. So these are a little bit controversial because a lot of people took out interest only mortgages before the financial crisis. Uh, and those mortgages that taken out in the early 2000s, because people are only paying the interest, they're not forced into repaying the capital. And that means that actually they need to have a plan for how they're going to repay the capital at some

Speaker B: point, which presumably could be quite chunky. By the time comes around to it,

Speaker C: it will be the exact same size in theory as the size of the loan they took out, which could be hundreds of thousands of pounds. Now you can do that in two main ways. Firstly, you could sell the house and downsize, which some people say they plan to do. Uh, the other way that people do it is by having invested and saved a lot of money on the side. So they might have been putting regular money into ISAs over 20 years and therefore have a big pot of money they can use to pay it off all in one. The FCA is quite concerned about that cohort of people from the early 2000s because lots of them, it's uh, quite unclear how they're going to repay it when they get to the end unless they downsize. However, here they're saying, well actually maybe all those barriers we put on interest only mortgages, maybe that's too much. Maybe for some people it is the right thing to do. And so they're actually talking about loosening it very slightly, particularly again for the self employed people. So the FC is hoping maybe slightly More self employed people have interest only

Speaker A: mortgages and I think it makes sense. Um, they're thinking about the size of the loan in proportion to, to the value of the property. And you know, if you've only borrowed 25% uh, of the value of the property, um, you know, then there's an awful lot of equity left in there. Uh, the loan is fairly small and if the uh, the property increases in value then you know, hopefully there's going to be extra money available to pay off some of that capital. So you're servicing the mortgage payments every month. So your mortgage isn't getting any bigger. Uh, you've just got to find a way to pay that capital and over a long period of time inflation is going to help you there as well. So you know, there were obviously lots of horror stories in the 2000s of, you know, people getting interest only mortgages just at the top of the housing market and then you know, finding themselves sort of plunged into negative equity and you know, perhaps the loans were too generous and all of that led to, you know, these rules that came in. Um, you know, and I think as well, uh, you know, there was the combination of the mortgage endowment miss Selling scandal as well that has sort of been uh, going on in the late 90s and early 2000s where you know, people were also miss sold the savings vehicle alongside and so we're getting to maturity and finally they didn't have enough to pay it off. So it's right that there are protections there. Um, but clearly if the loans are very small and you've got plenty of equity in your house and the risk isn't so great, um, particularly if it's going to be sustainable for you to sell your property and use the equity that is left in your property to buy something smaller. So it seems to make sense to me.

Speaker C: And then the big one that I wanted to draw attention to staying in the realm of interest only is retirement interest only mortgages. So these are mortgages where you just pay off the interest every month and actually you will never repay, repay the capital until you pass away and then your estate will repay the capital. So it's a type of interest only but sold to people typically in retirement, hence the name or near retirement where actually they're just never going to repay the capital. Um, these mortgages are currently a tiny, tiny segment of the mortgage market in the uk. Uh, there are only a few thousand sold every year compared, uh, to the rest of the market is absolutely tiny. One of the things the sector has been saying for the last couple of years is that FCA rules are a barrier to us selling Rio's retirement interest only mortgages. And that's because currently the FCA rules say that affordability, uh, should be assessed on the basis of both people in a couple. So normally with a mortgage, if I was to take a mortgage with my wife, uh, the mortgage lender would assess our uh, affordability as a couple together. And it doesn't matter if one of us was to pass away. In their minds it's fine as a couple, you can repay it, but obviously in retirement it's quite likely. And in fact with a couple having a Rio, it's almost certain that one of them will pass away before the other. And therefore at the moment the lenders assess it on the basis of whether the part, whether each partner on their own could afford to repay the interest, which is a really high to hit, right, because you might have lost, well, you've lost one person out, uh, of the couple and they may have had a larger pension or something. That's a really big barrier to Rio's. And the FCA has agreed with the sector and has proposed removing that. So now Rio affordability, if this goes ahead, will just be based on the couple as a whole. And they're essentially saying if the couple can afford it, probably the surviving partner can afford it or downsize at that point. Um, which doesn't seem unreasonable. I guess what they're hoping here is that they'll sell more RIOs. The FCA thinks more RIOs will be sold and fewer uh, equity release lifetime mortgages. I think you've already seen some things on LinkedIn saying that's a bit contested here because of the silos and advice which we've talked about before. Maybe people aren't even comparing all their options. And in some ways the lifetime mortgage is better than a REO because you've got the no negative equity guarantee and other stuff going on. Um, and with many equity release mortgages you can already repay the interest. But, um, it's interesting that the FCA has sort of sided with the sector on this one. I think it sort of makes sense, um, as long as those extreme cases where it's really clear that the surviving partner would not be able to repay, that lending should probably still not happen. I think the FCA is on board with that.

Speaker B: And what about um, there was some stuff in there around loans as well, wasn't there? What did the FTA have to say on that?

Speaker A: Bridging loans.

Speaker C: Bridging loans. So I have to say I'm not that familiar with bridging loans, but I was looking into it and currently bridging loans are limited at 12 months. I didn't know they were limited at 12 months. Um, and that means that, um, if you get to the end of your bridging loan and then you're not able to sort of repay what you borrowed, you then need another bridging loan and that can be really expensive. So the FTA said, well, actually we're going to increase it to 24 months. So now you can have a bridging over two years. And in theory that will stimulate competition and help people borrow, um, that sort of, that, that, that bridge, uh, uh, amount of money at a slightly lower cost. I imagine this will be a real niche within a niche to need a bridging loan for over one year.

Speaker A: Yeah, I mean, it talked about, you know, people who are trying to break the chain, for example, when uh, buying housing, you know, and it just may be in those kind of circumstances, you know, that house sales fall through, things go wrong. You know, the property market in the UK is sort of notoriously slow, isn't it? So, um, you know, you can see situations where, you know, through no fault of the borrowers, externalities mean that, you know, they just haven't managed to get it all done by the end of the 12 months.

Speaker C: Which makes sense and reminds me of Fleetwood Mac at the same time. Um, so I guess the one final thing I wanted to call our attention to here was like, what are the measures of success in the FCA's eyes? I think it's really interesting. So the FCA say that the measures of success will essentially be the number of sales of those different types of mortgages we've mentioned. Presumably they mean the number of sales going up and also arrears levels, and presumably they mean arrears levels not rising by that much. And I think that's just an interesting tension in all of this, is that they're aware that there's risks involved with more lending.

Speaker B: And James, what's the reaction been to the changes so far?

Speaker A: Yeah, I haven't seen anything really critical. Uh, and I think that, you know, I'm sure that in time we will get some criticism of this from some corners, but it is quite a measured and careful consultation paper. You know, everywhere where they have talked about their proposals, they've got a section on why they're proposing it, they've got a section on potential risks and mitigations. Um, and I think it's worth saying as well that this isn't going to be transformational. Right. To the mortgage market. What it's going to do is help some people who probably legitimately, um, could afford a mortgage, but at the moment, you know, they're getting a computer, says no reaction and it's just harder than it needs to be. So, you know, the gig economy has been on the rise, you know, number of self employed people, um, you know, income, uh, has changed over the last 20 years, you know, um, since the financial crisis. So it makes sense to, to make little tweaks like this. I mean, I think, you know, if anybody tried to sell it as a total rebalancing of risk, which is, you know, all about, uh, getting millions of more people onto the housing ladder, you know, I don't think it is that, um, it's sensible tweaks. Uh, and you know, as we've said before on the podcast, you know, I think that we're fortunate. In the uk, the number of repossessions have been very low and nobody wants to have their house repossessed and lenders don't really want to do it. And I don't think we want to create a situation where we get back to a world where more people have their house repossessed. But, um, I think I'm probably persuaded that at the moment there are pockets of people who should be lent to, or lent to a more affordable race and haven't been given that opportunity. And now they will.

Speaker C: If you look at the FCA's cost benefit analysis, they go through how many more mortgages they expect under different scenarios to be sold due to this. And it's essentially a few thousand, maybe 10,000, maybe a bit more than that. For REOs, the high scenario is 100 additional RIOs and the low scenario is 1. Which made me, I've stared at this chart for ages today, trying to work out if I'm missing, uh, brackets, thousands somewhere. I really don't think I am. I think they're talking about incredibly low numbers here. This is a small tweak to the system.

Speaker B: Yeah. Um, to some very niche markets.

Speaker C: Exactly. And I hope, you know, the FCA is presumably hoping that, you know, in the long term this leads to, you know, better outcomes. But, uh, yeah, this is not going to be revolutionary on Rio's.

Speaker A: At least one of the charts that caught my attention and, you know, relevant as well to the sort of discussion we'll be having in the second half of today's show was just the number of people, uh, over the age of 55 who were taking out, um, Mortgages now, um, you know, just looking down the kind of capital and interest, you know, regular repayment mortgage column, um, we've gone from 67,000 in 2018 to 300,000 in 2025. And I mean, you know, I think we knew that's happening, right? You know, property prices have gone up, people are extending their mortgage terms, more people are having to remortgage in retirement. Um, so this is an expected trend, but it's interesting to see the scale of that and I wouldn't be surprised if that doesn't sort of carry on uh, rising at that rate quite quickly.

Speaker C: Well, I guess the interesting thing is whether those mortgages will be repaid or whether they will end up being moved into a REO or a lifetime mortgage. Is someone borrowing to the age of 80 or whatever, are all those people going to be fully repaying their mortgage or will they just essentially transfer into something they don't repay?

Speaker A: Yeah, yeah, exactly. But I mean, I think uh, as you know the idea like one of the things with interest only lending, um, you know they talk about here is sort of facilitating first time buyers who perhaps couldn't afford the full repayments of a repayment mortgage at the moment, but they know their salary is going to go up. And so you know, part of their um, plan to pay off the capital is that actually they're going to convert to a repayment mortgage when they can afford it. You know, if you're a junior doctor or something like that, you know, you earn, you know, a very low salary in your early years and then sort of once you're fully qualified and you get a proper job full time somewhere like as a GP or a consultant or whatever, your salary goes up significantly. So there are certainly people in those kind of professions who this will open the door for them to get on the housing ladder earlier. You know, I guess worst case scenario, it may trap some people, people may end up in negative equity if the housing market moves against them, um, and they're on an interest only mortgage and they borrow, you know, most of the price of the house and then it falls. But um, as long as they go in with their eyes open, I, I guess that's not the end of the world because you know their salaries will be rising. Um, I think the people we need to be careful of are the people who are sort of not in those professions where there's a clear salary progression and they're just over optimistic about their, about their life chances and you know, vine that in five or ten years time things don't look nearly as well as they thought. And they're now sort of trapped in negative equity in a property and no real plan to pay off, uh, the very large mortgage they've got.

Speaker B: Yeah. Well, some relevant discussions for what we're going to be talking about in the second half of today's show, but I think that wraps up the first half. We'll be back after the break to talk about Farah Finance's latest research into the later life lending market. Okay, welcome back. As promised in the second half of today's show, we're staying with the topic of mortgages, but shifting the focus to lifetime mortgages. This week, Farah Finance published the first findings of its new retirement Compass, which takes a deep dive into how housing wealth is distributed across the UK and where it may have the greatest opportunities to support people in retirement. Last year our economic analysis revealed that 51% of people over 60 may need to rely on their housing wealth to maintain their standard of living in retirement. This year's report, which like last year's research, was commissioned by the Equity Release Council, looks further into the detail. As well as showing how housing wealth is distributed in the uk, it also provides the first comprehensive look at how the equity release market shapes up today, aggregating data from all providers in the industry. And to top things off, it includes some new research gauging consumers opinions about the idea of using their housing wealth to fund retirement. The results published this week paint a national picture that there will be a follow up in the autumn which drills down into the regional picture as well. And the idea is that this research will be repeated every year to see how the market and, um, perceptions are changing. So, Tim, this has been your baby and keeping you very busy over the past few weeks. What were the key findings of our research?

Speaker C: Yes, James is smiling. This has been my baby and I am indeed expecting a different baby to arrive in the next week or two. Um, which may explain m why my voice morphs into someone else on the next episode. Um, it's like Doctor who regenerated. Yeah, a new improved Tim. You'll, uh, some very excited names lined up. Um, so I guess the starting point here is we were really thinking about who is likely to need to use their housing wealth. And we should say at the start that for many people it will be ideal that they're able to downsize rather than borrow through equity release. Downsizing isn't borrowing. You do, um, have transaction costs. But actually maybe it's optimal for society if you downsize. So if I then go on to talk a lot about equity release. Don't worry, downsizing is still really important.

Speaker A: Yeah, yeah. I mean, before we get into that, you know, I think it's just worth reiterating. That was, you know, a key focus of our report last year that, you know, actually, you know, all the things we're going to talk about today and you know, the sort of barriers to equity release are part of the problem in terms of accessing housing wealth. But, um, the lack of suitable retirement properties in the right location, uh, are also a barrier to people accessing their housing wealth. And you know, for a lot of people, if there was great retirement housing in the area where they'd, uh, raise their kids and build a community, a lot more people would be willing to downsize. But we don't have that at the moment. Um, and there were all sorts of problems in the retirement housing market, um, you know, that I think need cleaning up. Uh, and you know, as we'll talk about a bit, we need to change perceptions about use of housing wealth and retirement. But, um, yeah, this. So, so last year was very much like the exam question was how can more people access their housing wealth and retirement and how many people will need to. And so the answer to that was a bit more neutral. This year the commission is more give us a state of the nation picture of the equity release market. Um, so it is independent, it's as independent as last year. But I mean the brief was look at the equity release market. And so that's what we've looked at. Uh, doesn't mean we're advocating purely for equity release.

Speaker C: Absolutely. So we did a survey of five, uh, thousand people. Uh, and what we asked those people was all about their attitudes towards later life lending and downsizing. But actually we asked uh, over 4,000 of them all about their finances. And these were people who are homeowners aged 55 to 79. These are people with housing wealth who are either retired or going to be retired in the near future. And what we did was we identified, uh, their housing wealth and then we identified their average retirement income and we compared their average retirement climate income against different benchmarks for what is considered to be enough or a nice lifestyle. And so what we used for that was the Pensions UK minimum and moderate standards. The Pensions UK formerly PLSA standards a little bit controversial because they're set, uh, through people saying how they'd want to live in retirement. How people want to live in retirement doesn't always bear much reality to how much money people actually have to live in retirement. So these benchmarks, you know, they set a reasonable standard of living, but actually maybe many people aren't going to hit them. And actually that is exactly what we find along with loads of other studies, we find that loads of people aren't going to hit uh, the PLSA moderate living standard. So for a single that's £31,700. For a couple it's £43,900. That's spending. So that's after tax. These are actually quite high figures. They're higher than um, ah, many people get in their working lives. But we were looking at homeowners in that older age bracket and what we found was that uh, in total 46% of homeowners in that age bracket will not meet the moderate living standards. So that is almost half of those homeowners not getting what some consider to be a reasonable benchmark for later life living. Um, when we look at who these people are that aren't going to get the moderate living standards, we see that actually women who live on their own are much more likely not to hit it than men who live on their own or couples. So if you think couples have two sources of income, so actually they're better set. And then we see the gender inequality in that single men tend to have much better pensions than single women. However, the interesting thing is that the single women still have homes of similar value to the single men. So when you compare single men and single women in that age bracket, they're in very similar valued homes, very similar amount of housing assets that they could draw on in later life. But, um, the women have significant, significantly lower pensions. When we add it all up, what we find is that we get to 3.7 million homeowner households aged 55 to 79 that will have retirement income below pensions. UK moderate. Okay, you might say, but what if the value of their homes is just £10,000? That's not going to get them very far. Well, we have the answer to that, which is we looked at people in terms of how much housing wealth they have. And even for those people who have quite considerable housing wealth, 400k and above, we're finding there's 650,000 households there. So that's over half a million households who are not going to hit pensions. UK moderate, but have a home worth 400k and above. And some of those will have a home worth a million. Um, and I guess what we would say is that those people would be well advised to consider using their housing wealth if they wanted to, to improve the living standards. There's no compulsion to. They might be happier not doing that and saving the money for the kids or some other purpose. Um, but I guess that's the main punchline here is when we look into it, we see that those single women in particular, um, 1.4 million single women who are homeowners in that age bracket are not going to get pensions. UK moderate.

Speaker A: And Eve, I know, uh, at the Equity Release Council conference next week, you're on the stage presenting some data about single um, women specifically. As part of this research, we, we looked at perceptions around using housing wealth in later life. So it sounds like there's a great opportunity for single women who are under pension provisioned, but, um, thankfully, you know, often have housing wealth. Um, what about perceptions? Uh, how open are single women to the idea of using their housing wealth in retirement? And is that different from other cohorts?

Speaker B: Yeah, well, yeah, as Tim said, we did run this survey to find out a little bit about how people firstly feel about their retirement and then also how they think about later life lending. So firstly, just to touch on that, women are uh, generally aware of the problem they're up against. So on average women are more worried than men about their living standards in retirement. Um, so we asked those who haven't yet retired how they feel about their retirement income, their finances. So of those aged 18 to 54, 27% of women and 16% of men felt insecure about their families economic security, uh, in retirement. So we do see that gap there already. Um, and we see that continuing among the older cohort as well, people aged 55 to 79. Um, as Tim said, we did see, on average women have decent housing wealth. Um, although it's this kind of engagement with later life lending as an option that still remains low. Um, it remains low among women. And so women and men. So many are aware of equity release as an option. But what we see is after that, many haven't started that process of um, considering using it, accessing information about it, um, and so on.

Speaker A: So I think, you know, those sort of stats underline some of what we sort of talked about last year in the report that, you know, ultimately we need government regulators to, to change perceptions here. You know, at the moment, housing wealth isn't really in the debate about retirement income. Um, you know, I know we're, the government is building the pensions dashboard so people will have an easy view of all of their pension income and their um, you know, their, their potential, um, earnings in retirement. But you know, that needs to include housing wealth, uh, and we know the FCA is looking at breaking down those silos to try and make it easier for different parts of the financial advice market to talk about using housing wealth in retirement. I think we said in our report last year, mortgage lenders don't tend to talk about equity release like standard mortgage lenders, um, and they definitely don't talk about pensions and wealth and pensions advisors don't tend to talk about equity release. And, you know, think about housing wealth in the context of retirement. And then if you go to the government services like Money Helper, uh, or pensions wise, they don't really talk about housing wealth. Um, so, you know, we kind of need to bring it all into the mainstream because, um, you know, I think it's not surprising that, to me that those figures are where they are. But, you know, I think a lot of those people just haven't got to the sharp end of it yet, have they? And if they realize, well, actually I can live a better standard life here, and yes, it might mean that there's a little less to leave to the kids, but actually, you know, I can enjoy my retirement rather than living, uh, penury, then, uh, you know, I think we will see more people taking it up, but they need to feel, um, that it's something reasonable for them to do. And I'm on that note, there was some stuff in there that tried to get to the nub of, um, whether or not perceptions were softening. Is that right, Tim?

Speaker C: Yeah. So we asked a few questions. So more generally thinking about mortgages in later life, we asked people whether they thought it was becoming more common, and then a separate question on whether it was becoming more acceptable to have a mortgage in later life. And most people agreed with both those statements, which is a big shift on the last survey that was done by the Equity release council in 2023. So clearly, I think attitudes are changing towards mortgages in later life. However, when we zoom in on equity release, we asked a question on, um, do you think that people like you are likely to take equity release? And the people like you is interesting because it sort of indicates perceived social norms and we know from a behavioral perspective that social norms are really important for what people do. Um, and when we look at that question on people like you, we see that, um, I think it's 37% or 38% of people agreed that people like you are likely to take equity release, which is lower, but is also actually higher than I was expecting. We've got a fifth of people saying they'd consider it going forward, but actually a lot more than that saying, oh, maybe people like me might need it. So there's a bit of a mismatch here between.

Speaker A: Yeah, I mean, it's changing in front of our eyes, isn't it? The picture. And, uh, I think it's becoming more normal for people to be reaching later life and seeing that, you know, they've got a mortgage that's running past the point where they thought they might have retired and paid off their mortgage when they were younger. And I think, you know, that one of the perceptions that needs breaking down is that, you know, paying off your mortgage is sort of seen as, you know, the triumph. Um, exactly. You've got your debt free and now you can head off into retirement and your housing is all paid for and you can live in your house rent free. Um, but, you know, unfortunately, that's not the world we live in with houses being as expensive they are, particularly in the sort of southeast of England. Um, and so, you know, more people are going to be getting into retirement with, um, you know, with later life mortgages. Um, and I don't, you know, I think over time people are not going to see that as a failure anymore. But again, you know, I think we need to help that along, change people's perception about what housing wealth is for. Because there is a bit of cognitive dissonance here, isn't there, between, you know, I've definitely heard, I know this is very anecdotal, not based on our research, but, you know, over my lifetime, loads of people saying things like, oh, I don't really have a, A, ah, pension, definitely not enough to retire on. But, you know, my house is my pension. But then they get towards retirement and they're like, oh, well, no, I mean, my house is probably for my kids. I want to leave it to the kids, you know. Well, you know, unfortunately, if you didn't save enough for retirement, um, you know, that's your, that's your biggest store of wealth. You're going to have to use it.

Speaker C: Right.

Speaker A: Or live a really meager retirement. So, um, you know, let's start to normalize that.

Speaker C: I think the really interesting thing is that younger cohorts are definitely more accepting of borrowing in later life. And we find that in our survey and other surveys I think have found it as well. So younger cohorts, you're more likely to say, yeah, sure, I'll borrow. Is that going to mean that when they get there they're more accepting of it, or is the process of having paid a mortgage for 30 years and finally getting to the point where it's done. Does that process change you into someone where you're like, I'm not going to take out another mortgage in later life?

Speaker A: Well, maybe it's about rebranding as well. I mean, you know, in the moment. So the other part of our research was looking at, uh, the sort of state of, of the equity release market. Right. And, um, you know, actually, I don't think this was from our research. I think it was from some adjacent research that we were talking about the other day. The reasons that people take out equity release today, um, and you know, the most common reason is to pay off a mortgage. Uh, and of course, paying off a mortgage with an equity release loan, um, you know, effectively just puts income into your pocket every month, you know, rather than having to make those mortgage payments you were making with an equity release mortgage, the interest is rolling up. Um, and so, you know, do people. Would people see that as a failure, you know, to exchange one form of debt for another? Um, or, you know, do people just get their head around it, you know, that people feel quite differently about a mortgage to how they feel about a credit card or unsecured debt, which feels a bit more like kind of, you know, a burden for a lot of people that, you know, something that you really want to get unshackled from. But mortgages, well, you've got to. If you don't have a mortgage, you're paying rent anyway, right. So, um, it's part of life. So it's just about, you know, it is about changing people's perceptions. And I think that's got to be led from, you know, from all sides. From government, from industry, from, um, you know, the financial advice market and regulators.

Speaker C: Yeah. And I think that stat you're referring to is from Key Group and those, those reports they, they put out really helpfully on why people have borrowed.

Speaker B: Yeah. So I suppose, James, from your perspective, are there any sort of big surprises in our findings here?

Speaker A: I think, as we've been saying, you know, the big surprise, I think was in that survey data that actually perceptions are softening, you know, that actually people are saying, no, no, I wouldn't do it. But, yeah, people like me might. I think that does tell you that things are shifting here. Um, and also I think we always thought that the biggest opportunity was there for single women, but it's really confirmed that. And that actually for that demographic and particularly for those who are in the south of England and have got more valuable housing wealth, um, this could be their Sort of get out of jail card in retirement, you know, and, um, it's going to have to become more normal for people to use that wealth.

Speaker B: Well, as ever, I'm sure a topic that we'll be returning to. Um, but before we wrap up, there's just time for an update on other market news. The FCA's deputy chief executive, Sarah Pritchard, and the new Economic Secretary to the Treasury, Rachel Blake, appeared at the Treasury Select Committee last week and they were discussing the government's financial inclusion strategy. And James, I think you had a watch of that, didn't you? So what did they cover there?

Speaker A: Well, Sarah Pritchard got, um, sort of ambushed and ended up having to spend the first, uh, 20 minutes or so talking about motor finance. Um, and actually the Select Committee had written the FCA a, uh, very long sort of washing list of questions for them to answer, which, um, they had sent back to the committee, I think, the day before, um, Sarah Pritchard appeared there. Uh, and that wasn't in the public domain at the time, but it's, you know, the FCA's response since been published and Sarah Pritchard was really kind of talking to that. But, um, you know, that I think she sort of doubled down on the fact that, you know, the, the legal challenges against the redress scheme are going to extend things for a very long time. So, you know, the earliest we're going to see any payouts now is 20, 27. Uh, and then, you know, of course, if, um, those challenges are successful and a redress scheme can't be agreed, you know, and the FCA has already threatened that, you know, one of the outcomes of all of this may be that there is no redress scheme. Then, you know, let chaos commence where, you know, everybody has to take their cases to the Ombudsman and complaint or companies handle with them all differently. And then people go to the ombudsman or the claims management companies force them to go to the Ombudsman. You know, I think she said that would add an extra kind of 6 billion to the cost of all of this if that happens. So that's clearly not in anybody's interest. Um, and, you know, I think they're pushing very hard to try and get a reasonable, um, resolution here and sort of, you know, maybe, maybe there'll be some suggested tweaks after these court hearings or, you know, I guess what they're hoping is the court will say, no, your challenges aren't valid, get back in your box. But, but, um, I'm not close enough to the law to know what the likely outcomes are.

Speaker C: The tone of voice and the FCA's reply is just like, overtly frustrated, um, with the four, um, organizations that have appealed it, especially with the one representing consumers through that law firm, Cormacs and Consumer Voice. I think the fca, you don't need to read it in, uh, a passag voice to know that that is exactly what the fca, they're saying it through gritted teeth, aren't they?

Speaker A: They keep referring to it as a private company, you know, and obviously consumer voice. A bit like us, you know, we are a limited company. You know, we. We're a social enterprise. You know, I think if every time they referred to us, you know, they, they talked about us as a limited company, you know, we'd feel like that was, ah, you know, a very narrow view of who we are. You know, we like to refer to ourselves as a consumer group or, you know, a ratings agency. Um, so, you know, they're doing that quite deliberately. There was also quite a lot of stuff in that letter about, um, you know, who's funding all of the advertising out there at the moment, and there's some sort of, um, private equity, venture capital money, um, you know, funding all of the, um, advertising to try and generate as many claims as possible. And there was an astonishing stat, I think Sarah Pritchard said the ICO, the Information Commissioner's Office, has already had 6 million complaints about, um, unwanted advertising relating to car finance this year. Um, so, you know, this is, uh, you know, when we hear about it, we've all. We've probably all had them already. I've definitely had them. Um, and, you know, in many cases, you know, people are being encouraged to sign up with multiple firms, you know, encouraged to sign up when they never had a car finance deal.

Speaker B: I've been sent messages. I don't even have a driving license.

Speaker A: Right.

Speaker B: So that just shows you another piece

Speaker C: of information I didn't know that was in. Um, the reply was that, um, the FCA revealed that, uh, before publishing the enforcement action it had taken against a couple of claims management companies, those claims management companies had taken a judicial review over whether that could be published in the public domain. And one of those, uh, I think the FCA said they had planned to talk about it publicly in September, but it was pushed back to January because there's the litigious company that they were taking to task. I guess we shouldn't be surprised that people, when faced with FCA action, push back. And this is a litigious sector, perhaps. But, um, I thought that was an interesting bit of intel as well. We don't know what's going on behind the scenes. We only see it when it's published and there's often quite a delay.

Speaker A: So the committee was quite interested in that. But then when they got onto the financial inclusion stuff, I thought they were actually a little bit meek, uh, particularly with Rachel Blake. But I mean, she's only been the Economic Secretary for three and a half weeks. Um, you know, many jokes were made about her being the fourth post holder in this government in less than two years. It's a bit of a revolving door. Um, and they didn't give her a very hard time. You know, they played back some of the comments that we'd heard in previous evidence sessions. You know, some of the consumer groups had said that, you know, it was a bit weak and, um, you know, and of course, as you'd expect, she said, no, it isn't, uh, it's ambitious. And she had her flanked by her civil servants to back her up on that. Um, you know, but I don't think, you know, it definitely wasn't a classic in terms of a Treasury Select Committee hearing.

Speaker B: And when can we expect a final report from the committee on financial inclusion?

Speaker A: Well, I think that was the last evidence session. So, um, you know, I mean, there's been quite a big gap since the last, uh, evidence sessions. You would have thought that they had sort of already gathered together most of that report. So I'd imagine now that that's done, there's every chance it'll be published before the summer recess, um, to get that one out the way.

Speaker B: Yeah, and we'll obviously be keeping an eye out for that one. Um, we've also got a new inquiry into the consumer insurance launched by the House of Lords Financial Regulation Committee. So what's that going to focus on?

Speaker A: Well, this is basically a sort of, um, you know, another follow up to which is Super Complaint. Um, you know, which has obviously managed to persuade the Lord's Financial Regulation Committee to, um, you know, to pick up its complaint and do its own piece of work, looking at whether or not we've got the right balance of regulation. Um, you know, I'm speaking at that next week and I, I'm not sure what it's going to be like, but I think the makeup of the people on that committee is very different to the Treasury Select Committee. These are all peers who have mostly worked in or around the financial services sector across their careers and from previous hearings that we've seen of that committee, they tend to be quite sympathetic to the industry. So, um, you know, I'm actually really surprised that they've picked it up as a topic that they want to cover. Uh, I'm looking forward to seeing what questions they throw at me. But, m. You know, at the moment, uh, well, I'm going to reserve my judgment for where they're going to go with it. You know, the fact that they've picked it up at all, I think is a good sign because it's another opportunity to try and make some of the points we've been making over the last couple of years that, you know, there are problems in this market and the regulations need fixing, you know, and another opportunity to talk particularly about insurance pricing, which I think has got lost, um, over the last couple of years. So that's what I'll be talking about. What comes out the other end of that? Who knows?

Speaker B: Okay, so lots of activity in Westminster to keep an eye on over the coming months, but I think that's about all we've got time for this week. So, as ever, a big thank you to our producers Angbi Navas and Julia Gasparri, and to composer Eamon O'Dwyer for creating our music. We really hope you've enjoyed this week's episode. If you have, we'd love you to leave us a review on whichever platform you listen to us on, or even better, share a post about us on LinkedIn or perhaps let a few of your colleagues know. As ever, if you want to get in touch with us to let us know what you think about the show or to suggest topics for future episodes, you can email us@, uh, farrahfinancerafinance.com we'll be back again in a couple of weeks. Thanks for listening and bye for now.