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FCA and Equity Release in 2025: Regulations and Guidance

The FCA regulates equity release through stringent guidelines that ensure transparency, fairness, and protection for consumers, overseeing the conduct of providers and advisers.
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How Does the FCA Regulate Equity Release? Was Equity Release Truly the Right Decision for You and Your Family? The FCA Investigates...
This article contains tops tips from our experts, backed by in-depth research.
Katherine Read
Written by Katherine Read
Bert Hofhuis
Edited by Bert Hofhuis
Paul Sawyer
Reviewed by Paul Sawyer

Contributors:

Francis Hui
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Key Takeaways
  • The FCA Regulations for equity release in the UK include stringent provisions to ensure the protection of the consumer, including mandatory financial advice, clear risk warnings, and strict rules for advertising.
  • There's a strong set of rules in place to make sure everyone's treated fairly. This means companies have to be crystal clear about what they're offering and face stiff penalties if they step out of line.
  • The folks in charge have a big role in keeping everything above board, making sure companies stick to the rules that protect you and keep the whole system honest.
  • For companies, this means they've got to be upfront about their products, give you the advice that fits your needs, and sort out any complaints or issues properly. It's all about making sure you're in good hands.
  • And if a company doesn't play by the rules? They could be hit with big fines or even lose their license to operate in this space. It's serious business to keep everything on the straight and narrow.

Great news, the Financial Conduct Authority has warned financial advisors that it'll be looking into the equity release sector.

Given the growing demand for equity release products, it's a good move for he FCA to ensure consumers are protected against incorrect advice.

In This Article, You Will Discover:

    At SovereignBoss, we make it our mission to bring you the latest equity release market news so you stay in the know. If you're considering unlocking equity, then you're in luck because the FCA is dead set on protecting your interests.

    Find out more NOW!

    Why's Equity Release a Significant Life Decision?

    Deciding to take out a later life mortgage or equity release product is a significant life decision, especially when you're over 55.

    It impacts your financial future at a critical point in your life.

    Since using equity release is a significant life decision, the FCA1 stated:

    "This makes it particularly important that firms and advisors get their advice right.”

    The Initial Inquiry

    In 2020, the regulator made it known that it was concerned that certain mortgage advisers were not providing their clients with the correct level of advice.2

    It’s essential that a client can trust their financial advisor, which is what the FCA sets out to ensure.

    Based on the review of the market by the FCA, it had mixed findings where it unfolded that in the correct cases, the lifetime mortgages were working well and in some cases, they were not.

    The 3 most critical points of concern related to financial advisors were:

    • They did not challenge the client's assumptions enough.
    • The advice they gave was generalised and not as personalised as it should be.
    • The suitability of their advice could not be substantiated correctly.

    The FCA also found that it's far easier for a financial advisor to sell a client an equity release plan instead of a retirement interest-only mortgage.

    The commission earned on an equity release plan is 10 times more than the commission earned on a retirement interest-only mortgage.*

    *This is for indicative purposes only.

    The problem in the equity release advice market is that it's far easier to qualify for an equity release product than it is for a retirement interest-only mortgage.

    The latter has far more stringent qualifying criteria.

    As a result, many over 55's approach their financial advisors looking for a retirement interest-only product, but may end up with an equity release product instead.

    This begs the question of whether commission bias is creating a shortfall in the advice given to consumers.

    The follow-up steps that the FCA is set to take include looking into the suitability of advice, and where this falls short, take the correct supervisory action.

    What Can Financial Organisations & Advisors Expect?

    Advisors and firms can expect a deep dive into their practices by the FCA, and must ensure the following:

    • Documents showing evidence to support their suitability of advice must be kept.
    • When advising to take out an equity release product for the first time or as a repeat client, or even making amendments to a current plan, the advice given must be adequate.
    • The correct process must be followed to obtain all the pertinent information from a client to advise them correctly.

    Common Questions

    What Are the FCA Regulations for Equity Release in the UK?

    How Does the FCA Protect Consumers in Equity Release Schemes?

    What Role Does the FCA Play in Equity Release?

    How Can I Comply with FCA Regulations on Equity Release?

    What Are the Consequences of Non-Compliance with FCA Equity Release Regulations?

    In Conclusion

    The FCA and Equity Release Council has taken steps to protect the customer by making it mandatory that all equity release products allow the customer to make penalty-free part repayments.

    This alteration means that the effect of compound interest reduces the costs of lifetime lending for the consumer.

    The FCA's warning that it will review equity release practices is good news for consumers, as it may help address issues like commission bias.

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