The FCA Consumer Duty when Taking Out Equity Release
Equity release is a fantastic way for older homeowners to unlock the funds and cash that is tied up in their property, without the issue of having to move home.
For many homeowners, this can be a sensible part of later life and retirement financial planning. However, choosing an equity release loan is also a complex and very important decision.
Deciding whether or not equity release is for you can help you with security, inheritance and peace of mind for decades and years to come.
Due to this, the Financial Conduct Authority’s Consumer Duty has introduced a new benchmark when it comes to how equity release products are designed, distributed and managed.
Rather than focusing solely on regulatory compliance, the Consumer Duty aspect of most equity release loans places client outcomes firmly at the centre of every stage of the journey [1].
For those homeowners considering equity release in 2026 and beyond, this will have a huge difference.
This change affects how products are explained to homeowners, as well as how advice is delivered to clients and how the set up costs associated with taking out an equity release loan are presented as well as the associated paperwork.
For equity release advisers, the Consumer Duty highlights both a challenge when it comes to equity release and most importantly, an opportunity to raise equity release standards, build better trust and demonstrate real value to homeowners and those considering taking out an equity release loan.
This article explores what the Financial Conduct Authority’s Consumer Duty means in practice when taking out an equity release and what it matters to homeowners up and down the country.
Understanding the FCA Consumer Duty
The Consumer Duty represents one of the most important changes to UK financial regulation in decades. The Financial Conduct Authority introduced this in order to raise standards when it comes to consumer protection, and it also moves beyond certain compliance issues [2].
Put simply, the Consumer Duty means that equity release advisers, lenders and firms need to ask a very simple but powerful question at every stage of the process.
This question is “Is equity release genuinely going to work in the customer’s best interests?” If the answer is no, then they should not proceed [2].
This question should apply not just to advice and sales conversations or meetings, but also when it comes to the equity release product and loan design, equity release marketing, pricing and even all communications.
The Consumer Duty is permanent and ongoing, meaning that equity release advisers and companies must continually assess whether their clients are experiencing fair and appropriate advice and support throughout their equity release loan, even after the loan has completed [2].
Why This is Important for Equity Release
Equity release products are unique in many different ways in that they usually involve a lot of money being lent, as well as a number of different and very complex features such as compound interest and no negative equity guarantee.
Likewise, they also involve a number of long-term consequences, such as inheritance for loved ones. In many cases, equity release clients experience a range of complications that puts their equity release eligibility at risk, including health considerations or changes in family dynamics.
The Financial Conduct Authority (FCA) has also long recognised that these factors can increase the risk of outcomes of equity release, especially if equity release products are misunderstood or mis-sold in the first place.
This is why Consumer Duty is so important. Consumer Duty understands this and is raising standards across the equity release market.
Rather than focusing solely on ticking boxes, equity release advisers and their companies must show that equity release genuinely delivers a lot of value, clarity and support for homeowners who choose to release equity from their home.
The Four Consumer Duty Outcomes when it comes to Equity Release
The Consumer Duty contains four key outcomes, which are all relevant to equity release specifically. These are listed and explained for you below [1].
1. Products and Services
The Consumer Duty laid out by the Financial Conduct Authority lays out that all equity release products must be designed with a clear target market in mind.
This means that all equity release lenders and providers should be able to explain who a particular product is suitable for. Likewise, they also need to understand and be able to communicate who the product is not for.
This includes features such as early repayment charges or fees, as well as inheritance protection, and drawdown plans. Offering these features to homeowners must align with their wants, needs and specific circumstances, rather than being bolted on as marketing extras.
2. Price and Value
One of the most important changes introduced by the FCA’s Consumer Duty is the focus on value. When it comes to equity release, this means looking beyond just simple interest rates and being able to consider the overall cost of a product, including the compound interest that will accumulate over the years which should be laid out in your illustration.
It is important to understand that all equity release companies and advisers are expected to have a think about and assess whether the equity release fees, charges, and interest rates are going to work for their client.
For homeowners who have clearer explanations of how the associated costs build over time, it is useful to use realistic illustrations rather than just simply the best-case scenario. It is important to also leave your clients enough time to weigh up the associated costs, to be sure that it is the right decision for them.
3. Ensuring Consumer Understanding
Likewise, the FCA states that all equity release advisers need to ensure that homeowners and clients need to have a solid grasp and understanding of how equity release works before committing to an equity release loan.
It is important to understand that equity release has never been a simple concept. However, under the Consumer Duty, complexity is no longer an excuse for simply poor communication to clients.
Equity release advisers must take reasonable steps and make sure that all homeowners considering equity release genuinely understand key features, including the risks before proceeding with the loan.
This includes explaining what compound interest is, the impact equity release has on inheritance, when early repayment charges might apply and what alternative options might be available to them, including downsizing.
It is very important to understand that this means more than just simply providing lengthy documents to them. You must communicate this with them in person or over the phone and you must check their understanding.
All communications about the features of equity release should be clear and balanced and they should also be structured in a way that supports real understanding, rather than information overload.
4. Consumer Support
Likewise, the FCA’s Consumer Duty now states that all equity release advisers must offer substantial consumer support.
It is important to understand that the relationship between a client and equity release provider does not end once the loan has completed. In many ways, it lasts for the entirety of the customer’s life.
Under the Consumer Duty, all equity release advisers (and their companies) must offer appropriate support for the duration of their loan. This includes answering any questions that they might have, agreeing to make any changes where they can, or raise concerns when needed.
It is also important to remember that equity release loans last for the duration of the homeowner’s life, or until they move into a care home. During this time, there will most likely be changes in their health, changes to their cognitive ability or even their communication preferences. It is important that advisers are on hand to help with any of these major life changes.
Vulnerability when it Comes to Later-Life Borrowing
A key theme running through the Consumer Duty is the treatment of vulnerable customers. When it comes to equity release, vulnerability does not necessarily mean incapacity or distress.
Vulnerability may arise from a number of different age-related issues, including health conditions, bereavement or simply just life transitions.
Due to the changes laid out by the Financial Conduct Authority [2], equity release advisers are expected to be aware of these potential changes and alter their communication where necessary.
This might include things such as allowing more time for decisions to be made, encouraging family members to be involved (in a small way, never a big way) in the decision making process where appropriate, or simply providing information in alternative formats such as written or verbal communication.
Marketing and Promotions
Another big change concerns how equity release is being marketed and promoted. How equity release loans are marketed plays a huge role in shaping homeowner expectations from the offset.
Under the Financial Conduct Authority’s Consumer Duty, all marketing and promotional material must be balanced, highlighting both the pros and the cons associated with equity release as well as the associated risks [2].
This means avoiding language that oversimplifies the loan itself or the potential outcomes of taking out an equity release loan.
While many homeowners do benefit from opting for equity release, it is important to remember that it is not suitable for everyone and the marketing surrounding equity release should reflect this fact.
Conclusion
The equity release market is growing rapidly and is therefore changing a lot. As the equity release market continues to grow and change, the FCA and now Consumer Duty is likely to directly change how lenders and advisers work, what products are available, how advisers are able to communicate and advise homeowners and marketing tools.
Equity release advisers need to embrace this change, rather than treating it as a compliance exercise or box ticking exercise. By doing so, they are likely to stand out in a crowded market and also offer more value to their clients.
By focusing on clarity, fairness and increased ongoing support, equity release advisers are now able to build stronger relationships with homeowners and have the chance to create a more sustainable equity release industry.
References
[1] https://www.equityreleasecouncil.com/wp-content/uploads/2025/05/ERC00151-Consumer-duty.pdf
