FCA Seek Remedies To Free Mortgage Prisoners

The Financial Conduct Authority (FCA) have released information on the ways it can help ease the burden for mortgage prisoners that are unable to switch because they are with defunct lenders or in negative equity.

According to the Mortgages Market Study, the FCA have released suggested amendments that would alter the way lenders assess a customer’s viability for a new deal.

It has been proposed that for those customers looking for a better deal, who remain up to date with their mortgage payments and are not looking to borrow more, lenders should be using a more proportionate assessment that enables them to consider the borrowers mortgage circumstances.

To ensure that more mortgage prisoners are able to switch, the FCA have proposed a remedies package which includes:

  • seeking to speed up more widespread participation by lenders in innovative tools to help customers more easily identify what mortgages they qualify for
  • a proposal for the Single Financial Guidance Body (SFGB) to extend its existing retirement adviser directory (currently under the Money Advice Service brand) to include mortgage intermediaries to help customers make a more informed choice of broker
  • also consulting, in the spring, on proposals to change mortgage advice rules and guidance to help remove potential barriers to innovation
  • further, in-depth analysis to understand more about those customers that do not switch mortgage to inform any necessary intervention

Additionally, the FCA are aiming to adapt and change mortgage advice rules and guidance by the end of Q2 to ensure that these issues are eradicated in the future.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “The market is working well for many with high levels of customer engagement and competition.  The package of remedies we are taking forward will benefit consumers by encouraging innovation and making it easier for them to find the right mortgage.

“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.”

Nicky Morgan MP, Chair of the Treasury Committee, said: “Thousands of customers are trapped on a far higher interest rate than is necessary through no fault of their own. Following constant pressure from the Treasury Committee, this confirmation of the FCA’s decision to act is welcome.

“The FCA’s proposals should make it easier for some mortgage prisoners to switch to new providers.

“But the FCA’s rules apparently aren’t expected until towards the end of the year. For some families, this may be too late. Speed is of the essence in this case, and every month will count.

“This will not be a panacea for those ‘mortgage prisoners’ who are in arrears or are regarded as ‘risky’ for other reasons. Some of those may have been pushed into arrears due to the high rates they pay. That may require more thought by government.

“Lending is a commercial decision so the FCA cannot force firms to lend to these mortgage prisoners. But once the regulator’s new rules have come into force, industry should be ready to step up to help those borrowers that meet their risk profile.”

Do you feel that these changes will help those stuck in their existing mortgage deal? What needs to be done to avoid problems like this in the future?

Today's Conveyancer