CML commits to FCA interest-only plan
The FCA has released plans today to ensure lenders make sure that borrowers have sufficient plans to meet their contractual obligation to repay their mortgage when it reaches maturity.
The regulator recognises that the responsibility for repaying the mortgage lies with the customer but emphasises that firms should nevertheless have a systematic and consistent approach to communication and practice to ensure that customers are treated fairly.
Paul Smee, CML director general, said: “Lenders recognise that they have a valuable role to play in helping their customers to plan ahead and to take action in good time to reduce the risk of being caught short when the time comes for the mortgage to be repaid.
“We are working as an industry to ensure that good, pre-emptive communication with interest-only mortgage customers is the norm.
“Most people, even if they have not yet done so, have time to plan a satisfactory strategy for when their mortgage reaches maturity.”
Anyone with an interest-only mortgage maturing before the end of 2020 should expect to be contacted over the course of the next 12 months by their lender (if they are not already in communication with their lender on this issue) about their repayment plans.
The aim is not to force customers to take actions they do not wish to but to ensure they are aware of their mortgage repayment position and have an opportunity to take steps that may prove useful to them in avoiding unforeseen payment shocks later.
CML members are also putting in place further communications with interest-only borrowers whose mortgages are due to mature after 2020.
However the focus will initially be on customers who have less time in which to consider their options if they do not yet have firm plans in place.
The CML has produced an “interest-only toolkit” which CML member mortgage lenders have already been using for the past year to help them work with customers to minimise the risk of unexpected difficulties when their interest-only mortgage reaches its end date.
The CML has also worked with the Money Advice Service on a practical action plan guide for consumers.