Swift action is needed to help ‘mortgage prisoners’, says Treasury committee
PLANS TO help “mortgage prisoners” who are trapped into paying higher rates on their home have been outlined by the City regulator.
The Financial Conduct Authority (FCA) says it is looking at how barriers may be removed to help them – and will publish a consultation paper this spring. Some mortgage customers have difficulty switching because they took out a loan before stricter lending rules were introduced after the financial crisis.
Andrew Bailey, chief executive of the FCA, has written to Nicky Morgan, chair of the Treasury Committee, to provide an update on the regulator’s work on the issue. In his letter, Mr Bailey said the “key issue” for customers of inactive lenders and unregulated firms was that their mortgages are with lenders that do not or cannot offer them a new loan.
He said: “In our view, the solution for such customers is therefore a switch to an active lender, with whom they may be able to get a better deal. We want to remove potential barriers in our rules to those customers switching to a cheaper mortgage.
“To help these customers, we will consult on changes in our responsible lending rules, with the aim to deliver a more proportionate affordability assessment.”
Ms Morgan said: “Under pressure from the committee, the FCA has worked with industry and established a voluntary agreement, which allows most of the 10,000 mortgage prisoners of active lenders to switch to a better deal.”
She continued: “The regulator must now act swiftly to help these 140,000 mortgage prisoners, and not use this consultation to kick the issue into the long grass.”
The FCA’s new proposals, around lenders’ affordability assessments, could help customers who are looking for a cheaper mortgage deal.
However, not all will benefit. Those in arrears, negative equity or with other considerable debts are likely to struggle to find another lender.