Watchdog should ease mortgage repayment burden

PROVIDERS OF home mortgages quite rightly work within rules which set out an affordability framework.

Applicants understand such a need and that it is for their own protection. Most plan their deposit and accept that their income will be a key factor.

As the regulator, the Financial Conduct Authority has devised the rules which it tightened in 2014. It had the foresight to see that troubled economic times lay ahead but sadly lacked the imagination to look beyond the circumstances of a first-time buyer.

Not for the first time, the FCA does not appear to be in touch with the market. Otherwise it would not have provided a sledgehammer to crack a nut.

The same rule for a first timer with a home loan should not be the same for an applicant seeking a remortgage.

The result is that around 140,000 are locked into plans with interest rates way above the market level for their needs. They are borrowers who took out fixed interest rate mortgages when the affordability criteria was more relaxed.

At the end of the loan period, they wish to renew but cannot by the restrictive terms. The result is that instead of paying typically 1.6-2 per cent for another fixed period, a rate around 4.4 per cent is imposed.

When there is no intention to move home, no change in circumstances and no more money is being requested, the FCA has no reason to impose unrealistic rules.

Lenders have the benefit of seeing the repayment history and know that the vast majority present no risk whatsoever.

The FCA historians have looked up interest rates for the last century and seen that levels did reach 17 per cent (November 1979-July 1980) but today it is a very different credit story.

Instead of delaying whilst it carries out a consultation exercise, the FCA should immediately unshackle those poor mortgagees who cannot gain a sensible rate.