In March, the Financial Conduct Authority (FCA) 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.
However, the Intermediary Mortgage Lenders Association, who represent 19 of the 20 largest UK mortgage lenders, believe that the FCA proposals could unfairly and cruelly raise borrowers’ expectations who may remain trapped in their current mortgage deal for the foreseeable future.
IMLA also claim recent FCA reports will paint an unrealistic picture of the short to medium-term mortgage market.
According to the Mortgages Market Study and the consultation paper on responsible lending (CP 19/14), the FCA suggested amendments that would alter the way lenders assess a customer’s viability for a new deal.
It has been proposed that lenders should view customers looking for a better deal, who remain up to date with their mortgage payments and are not looking to borrow more, more favourably.
It was suggested that lenders should be using a more proportionate assessment enabling 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 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.
IMLA have argued that many lenders are unable and unlikely to incorporate modified assessment processes when looking to approve re-mortgage applicants. At the very least, it is claimed that new rules will take months to test, adjust and apply.
The industry body has urged the FCA to conduct more significant research, using a target group, before learning from the process and sharing the information.
Additionally, IMLA have suggested the FCA and the Government dust off a 2009 policy proposal held within a Treasury Consultation paper. The policy ‘planned to expand the definition of the regulated activity of administering a regulated mortgage contract.’
Kate Davies, Executive Director of IMLA, commented:
“The regulator has put forward clear proposals to address the issue of mortgage prisoners in the UK, which is to be welcomed. However, there remains a great deal of confusion around the number of ‘trapped’ borrowers these changes are likely to help.
“Our industry must therefore be careful not to unrealistically raise the expectations of borrowers. Proposals such as modified affordability assessments will only support a small number of borrowers who find themselves unable to re-mortgage onto better deals.
“IMLA believes that the regulator and Government should consider alternative measures, including advanced legislation that was abandoned in 2013, to improve protections for those who remain unable to switch to a cheaper, more suitable mortgage deal.”
Do you think regulator and Governmental consultation papers concerning mortgage prisoners are inadvertently and unnecessarily raising the hopes of people locked in an unfair mortgage deal?
