Later life mortgage lenders and equity release providers must “step forward” to develop the right products, improve access to advice and build trust, or others will take their place, warned the Financial Conduct Authority (FCA) at an industry event.
Speaking at the Later Life Lending Summit, Emad Aladhal, director of retail banking, said using housing wealth to provide for retirement continued to be seen as an “option of last resort”, when in fact, it could become the fourth retirement pillar.
The state pension, workplace pensions and personal pensions are the three established pillars of retirement funding, but the FCA believes unlocking the equity from people’s homes can be the fourth.
But in a warning to the market, Aladhal said: “You need to step forward because if you don’t, I expect others will step in to define that future.”
According to research released by consumer group Fairer Finance, by 2040, 51% of households aged 60 and over could benefit from accessing their housing wealth in retirement through later life lending. It is estimated that these consumers will hold around £4.3trn in housing wealth. The same research estimates that it could unlock around £23bn each year in today’s prices.
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Products and funding must evolve
However, the audience of later life professionals were told that the market could not rely entirely on existing products and funding models to meet future retirees’ needs.
Aladhal said: “This market has innovated to produce products that offer more protections, more flexibilities and more features. [But] innovation does not automatically mean more value for consumers, it can sometimes mean greater complexity and cost.
“The test is not whether products are more sophisticated but whether they work better for consumers, helping them achieve good outcomes.
“Looking ahead, future retirees will have different needs and different levels of wealth. We should ask whether today’s baseline is still the right one.”
Aladhal said it was not a case of changing the design of existing products – alternative methods of funding lending into retirement should be explored such as securitisation and forward flow arrangements.
He added: “Unchallenged, bulk annuity capital is likely to remain the primary source of funding for decades to come.”
Advice approach must be reconsidered
Currently, the FCA director said the market was not yet positioned to deliver later life mortgages at scale – pointing to its own data that showed that of the 330,000 mortgages advanced to over-55s in 2025, only 9% were lifetime mortgages or retirement interest-only (RIO) products, equating to around 30,000 contracts last year.
He also acknowledged that consumers often only engage with an adviser to unlock housing wealth when they are under financial pressure and feel their options are limited, saying: “Advice is often not considering those options for retirees.
“If the underlying need is clear but take-up is still limited, we have to ask where the journey is breaking down. Is it awareness, trust, or both?”
The market’s silo set-up of mortgages, pension, investments and later life planning was criticised – with the FCA making it clear that it shared the market’s vision for more holistic advice. The role of technology, artificial intelligence (AI) and data-driven tools were credited for shaping advice, sourcing and decision-making – innovation that the lending life lending market should not wait in adopting.
Step forward
Aladhal concluded by sounding a call to arms to the industry.
“You are well-placed to help shape what the fourth pillar of retirement funding becomes in practice. We want to work with you to support a better future market.
“If we get this right, the prize is much bigger than market growth alone. It is a future where more consumers can approach later life with confidence and control over the choices available to them. The opportunity here is clear – step forward,” he said.
The FCA is currently consulting on RIO affordability and is conducting a market study on the later life mortgage sector.