Regulator unveils plans to help mortgage prisoners
The Financial Conduct Authority (FCA) has proposed that lenders will be able to undertake a “more proportionate assessment” of whether a customer who is up-to-date with their mortgage payments and seeking to move to a cheaper deal without borrowing more, can afford the new loan.
As many as 140,000 homeowners are trapped in expensive mortgages with unregulated or inactive firms and are unable to switch to a cheaper deal under current affordability assessment rules.
These rules, which came into force in 2014, mean lenders have to apply stricter lending criteria to mortgage borrowers.
The regulator has come under increasing pressure to act on the issue and in November admitted that it made “no sense” for affordability rules to deny mortgage prisoners the chance to switch.
Many mortgage prisoners originated from mortgage books the government took over during the financial crisis, including Bradford and Bingley and Northern Rock.
“We are particularly concerned about consumers – who are commonly referred to as mortgage prisoners – who are currently unable to switch. That is why we are acting now to help remove potential barriers in our rules. These changes should make it easier for consumers to get a more affordable mortgage,” said Christopher Woolard, executive director of strategy and competition at the FCA.
The FCA also published the results of its review into the mortgage market today.
Among its proposals, it wants:
- To make it easier for consumers to find the right mortgage
- There to be a wider range of tools providing consumers with a choice about the support (including advice) that they receive
- Consumers choosing an intermediary to be able to do so on an informed basis
- Consumers to be able to switch more freely to new deals without undue barriers
- Regulator proposes changes to mortgage advice rules to encourage consumer choice
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