Charities: FCA could “go further” with new mortgage guidance

According to the new draft guidance, firms should consider a range of different support options to reflect the specific circumstances of their customers. The regulator explained that firms should not take a “one size fits all” approach.

The guidance sets out the FCA’s expectations of how firms should support customers once the June guidance is no longer in effect, which is expected to expire on October 31 2020.

The FCA said that where customers who have already had a payment deferral remain in financial difficulty, they will need tailored support.

The watchdog made it clear that firms should use a range of forbearance options, including doing one or more of the following in relations to mortgage contracts:

• Extending its term;
• Changing it to a product with a different interest rate;
• Changing it to interest-only;
• Further deferring payments due under it.

Firms have also been told to be clear about the credit file implications of any forms of support they offer to their borrowers.

Director of external affairs at StepChange Debt Charity, Richard Lane, said: “We’re pleased to see the FCA telling firms that they should not rush to possession action for people whose mortgage problems have arisen due to Covid, and that firms should not take a “one size fits all” approach.

“We’re also pleased to see the clarity with which the FCA sets out its expectation that people’s credit records should not be affected by having taken payment holidays if they resume their contractual payments and agree a mechanism for clearing arrears with their lender.

“However, we think there is still the risk of unintended consequences out of credit reference agency (CRA) reporting, both on mortgages and more generally. We would like to see more reassurance that the mechanisms agreed by lenders will be truly affordable, taking account of people’s wider financial commitments. It’s clear that the regulator still anticipates an impact on many people’s credit records.”

In agreement with StepChange Debt Charity, Jane Tully, director of external affairs at the Money Advice Trust, said the guidance “may not be enough to prevent serious mortgage difficulty for many.”

She added: “The regulator could go further by requiring lenders to continue offering specific protections to customers impacted by the outbreak – including requiring firms to offer further targeted payment deferrals as ‘forbearance of last resort’ in some circumstances.”