Mortgage customers who have previously been unable to switch mortgages despite being up-to-date with their payments (commonly known as mortgage prisoners), could soon be able to find a cheaper deal after the Financial Conduct Authority (FCA) proposed changes to how lenders assess whether or not a customer can afford the loan.
In the final report of its Mortgages Market Study, published today, the FCA confirmed its earlier findings that the mortgage market is working well in many respects but falls short of the FCA’s vision in some specific ways. The consultation on new lending rules forms part of a package of remedies designed to help the market work better.
In addition, the remedies package includes:
- seeking to speed up more widespread participation by lenders in innovative tools to help customers more easily identify what mortgages they qualify for
- a proposal for the Single Financial Guidance Body (SFGB) to extend its existing retirement adviser directory (currently under the Money Advice Service brand) to include mortgage intermediaries to help customers make a more informed choice of broker
- also consulting, in the spring, on proposals to change mortgage advice rules and guidance to help remove potential barriers to innovation
- further, in-depth analysis to understand more about those customers that do not switch mortgage to inform any necessary intervention
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:
’The market is working well for many with high levels of customer engagement and competition. The package of remedies we are taking forward will benefit consumers by encouraging innovation and making it easier for them to find the right mortgage.
’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 FCA has proposed that, for those customers who are up-to-date with their mortgage payments, and seeking to move to a more affordable deal without borrowing more, active lenders will be able to undertake a more proportionate assessment of whether they can afford the new loan. The FCA is particularly concerned about customers of inactive lenders and entities not authorised for mortgage lending as they are unable to move to a new deal with their existing lender. To ensure these customers are made aware of this change, inactive lenders and administrators of entities not authorised for mortgage lending will be required to review their customer books to identify and contact eligible customers.