FCA launches mortgage prisoner consultation paper

Ryan Bembridge

March 26, 2019

The Financial Conduct Authority has published a consultation paper on its plans to change rules regarding mortgage prisoners.

The FCA is consulting on allowing lenders to offer mortgage prisoners who are up to date with their payments a more affordable deal without borrowing more. This would help customers with inactive lenders who aren’t able to remortgage internally.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “We are particularly concerned about consumers – who are commonly referred to as mortgage prisoners – who are currently unable to switch. That is why we are acting now to help remove potential barriers in our rules. These changes should make it easier for consumers to get a more affordable mortgage.”

The consultation paper is called ‘Mortgage customers: proposed changes to responsible lending rules and guidance’.

Jackie Bennett, director of mortgages at UK Finance, said: “Lenders have been working closely with the regulator, responding to the challenge of so-called “mortgage prisoners” with a voluntary industry-wide agreement which has already seen firms contact over 26,000 customers.

“The regulator’s offer of more flexibility around affordability testing is encouraging. This will help those customers who are up to date with payments or who are not looking to borrow more.

“Requiring inactive lenders and administrators of entities not authorised for mortgage lending to review their existing customer books to identify and contact eligible customers is a positive step.

“However, even under these proposals, there are thousands more customers with inactive lenders or unregulated owners that the regulated industry would be unable to help. We therefore call on the government to work with the FCA to ensure that all customers, regardless of owner, have full regulatory protections to ensure they are treated fairly.”

Will Hale, chief executive of equity release firm Key, said: “Today’s announcement from the Financial Conduct Authority will come as a relief to the thousands of mortgage prisoners across the UK.

“While naturally we need to ensure that people can afford their mortgage repayments, common sense is vital and taking a serious look at how we can help people these people – especially those with inactive lenders – to improve their financial situations makes sense.”

And Andy Hancock, managing director, Money, MoneySuperMarket Group, said: “Today’s findings from the FCA are a step in the right direction to helping consumers, specifically the so-called mortgage prisoners.

“We welcome any measures that encourage innovation and competition amongst lenders and help consumers engage in the market and quickly find the right mortgage product for their needs.”

And Mark Arnold, chief executive, Kensington Mortgages, added: “Britain’s mortgage market is extremely competitive, but many consumers won’t find the best deals by simply looking at the rates offered by the big banks. The FCA seems to be focusing its efforts on finding ways to make sure that more people find it easier to scout out the best deals. That can only be a good thing.

“The answer, in our view, for mortgage prisoners is for the MMR rules to introduce a mortgage affordability test based on the customer’s past payment history. It’s therefore encouraging to see a consultation launched to propose these changes to responsible lending rules and guidance as a result of the mortgage market study.

“Such a rule change would be consistent with the requirements of the Mortgage Credit Directive (so could be implemented without any change in EU regulation), support the competitiveness of the UK mortgage market, and better accommodate the desired outcome of freeing the maximum number of mortgage prisoners from the current restrictions they face in moving to a more suitable and better value product for their needs.”

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