The Financial Conduct Authority (FCA) has launched a set of proposals designed to improve switching options for customers who are currently unable to do so.
The regulator’s mortgage market study found that some consumers cannot switch to a more affordable mortgage despite being up-to-date with their mortgage payments. This includes so called ‘mortgage prisoners’.
In a letter in January to Nicky Morgan MP, chair of the Treasury Committee, FCA chief executive Andrew Bailey revealed that there are 150,000 mortgage customers in the UK who fall into the category of ‘mortgage prisoners’.
FCA analysis found that of that 150,000, there are:
To reduce the barriers these consumers face now or could face in future, the FCA is proposing to amend our responsible lending rules and guidance so that mortgage lenders can choose to undertake a modified affordability assessment where the consumer:
Under the modified assessment, mortgage lenders must not enter into a new regulated mortgage contract with an eligible consumer unless they can demonstrate that the new mortgage is more affordable than their present one.
We are also proposing that:
Responding to the proposals, Jackie Bennett, director of mortgages, UK Finance, said: "The regulated mortgage industry wants to help eligible customers with unregulated or inactive lenders switch to a better deal.
"We support the FCA’s ambition in its proposals for greater flexibility over affordability assessments and are keen to work closely with the regulator in a joint implementation group to help those firms who want to participate and work towards a common launch date. We have suggested the FCA collects up-to-date information on closed book customers so lenders can understand their circumstances better and develop products that meet their needs.
"We will continue to work with the FCA and government to consider what more could be done to help customers in closed books who will not qualify for a new mortgage under the new proposed rules."