FCA issues IOM guidance
The regulator said it expects lenders to treat customers fairly and not “exploit” those in difficulty. It also reminded lenders that repossession of a property should be “a last resort”.
The FCA also warned homeowners with interest-only mortgages who do not have enough money to pay them off when they mature that they are ultimately their responsibility to find a way to clear their loan.
In May 2013 research published by the FCA found that up to 2.6m interest only mortgages will mature by 2041.
However, it concluded that almost half of these people – up to 1.3m homeowners – may be unable to repay the loan at the end of the term and faced an average shortfall of more than £71,000.
The regulator said: ‘We wanted to understand the risks to consumers when interest only mortgages reach maturity and borrowers do not have the capital to repay the balance due.
“And we wanted to develop – with the industry – ways of tackling this issue. As the industry has been seeking a steer from us on this area, we are setting out this guidance to help residential mortgage lenders and third-party administrators.”
To comply with governance, the FCA said that firms “must pay due regard to the interests of its customers and treat them fairly.”
The regulator suggests this could include writing to affected customers “early and frequently” and having a written strategy in place setting out the firm’s policy and procedural framework for managing such customers.