Lenders trapping mortgage prisoners on ‘unfair’ rates face action
The regulator has written to firms to ensure high risk borrowers who are on variable rates are treated fairly and not placed on much higher rates.
It also asked that firms make sure they are not imposing “unjustifiable burdens” on borrowers who may be experiencing temporary payment difficulties or unable to switch lenders.
“Where your firm holds the power to set rates for mortgages you administer, you should ensure your exercise of that power is consistent with your duty to treat customers fairly,” it said.
“Where the responsibility for setting rates is with an unauthorised firm you should draw their attention to this letter.
“Such firms must still comply with general consumer protection law including the Consumer Protection from Unfair Trading Regulations 2008.
“We consider that the standards of skill and care that may reasonably be expected of lenders in the mortgages market in the current exceptional circumstances arising out of coronavirus include reviewing their variable rates in the manner set out in this letter,” it added.
Firms have been asked to assess variable rates against factors such as funding costs and contract terms. Lenders have also been told to expect to provide written evidence to justify rates that have been charged.
The FCA said it would examine lenders’ responses in the coming weeks.
In light of the number of mortgage products which have been withdrawn during the lockdown, the FCA is giving lenders three more months to get in touch with customers about switching mortgage deals, taking the window to nine months.
This follows on from the changes the FCA made to mortgage affordability assessment rules in October to allow mortgage prisoners who were up-to-date on payments to switch products without barriers.
The regulator said it would be wrong to send communications to borrowers encouraging them to switch when suitable products were not available.
Its statement read: “We will keep this under review alongside other measures to support mortgage borrowers and are committed to working with industry to see this product development happen as soon as practicable.
“We recognise that our work to remove regulatory barriers to switching will not help all mortgage prisoners and that worsening market conditions will have implications for product solutions.”