Remortgagers set for tighter affordability checks
Customers who change lender, even if they don’t want to increase their borrowing, will be subject to affordability checks beyond what is required in the Mortgage Market Review.
In its policy statement, the FCA said: ‘We identified a conflict between the MCD and some of our current affordability rules for existing borrowers making changes to their mortgages.
‘As a consequence, we are therefore withdrawing certain enabling provisions as they are not MCD compliant.’
The changes will come into play from 21 March 2016, the same date second charge mortgages become regulated.
The only way mortgage prisoners will be able to evade tighter affordability checks after that date is by sticking with their existing lender and borrowing no more money, providing ‘the transaction is in the consumers best interests’.
The FCA’s document is called ‘Implementation of the Mortgage Credit Directive and the new regime for second charge mortgages, feedback to CP14/20 and final rules’.
The Building Societies Association said the directive ‘adds no additional benefit to UK consumers and risks adding costs and complexity to the mortgage application process’.
Paul Broadhead, the BSA’s head of mortgage policy, said: “Lenders now face additional time pressures of applying these rule changes alongside all of the other regulatory changes.
“We hope that once implemented, they will be able to get back to focusing their energy on product development, innovation and serving their customers, rather than solely on regulatory issues.”
The FCA will accept applications from second charge firms wishing to gain permissions from 20 April 2015, while firms will get a decision within six months with a complete application or 12 months with an incomplete application.
However, the regulator said: ‘In practice, we usually determine applications well within these service standards.’