FCA to modify rules on mortgage prisoners

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It has been revealed that the Financial
Conduct Authority (FCA) will be reassessing rules to help those who have been
named as ‘mortgage prisoners’. The term refers to homeowners who are not
necessarily looking to move properties but are unable to change providers due
to being trapped on a rate by their current mortgage provider.

It is estimated that there around 150,000 people across the country who are classified as mortgage prisoners. Broken down into sub-categories, this equates to approximately 10,000 of these borrowers who are stuck on a rate with an authorized firm, 20,000 with a mortgage provider who is no longer lending and a staggering 120,000 who are trapped by a mortgage rate with a firm no longer authorised to lend.

What
action will the FCA take?

The FCA has stated it is proposing the idea of
a ‘modified assessment’ which will be a softer version of the affordability
checks that are carried out when someone applies for a mortgage. This
assessment would only be applicable to homeowners who are not looking to borrow
additional money and those who have kept up-to-date with their repayments thus
far. If borrowers meet these modified criteria, then they may then be eligible
for a lower, more flexible rate through remortgaging or through an
interest-only mortgage.

If this proposal is brought to fruition,
downsizers may benefit too, since those looking to sell their property and move
to one of a lower value, may too be able to go through the modified assessment
and access better rates.  The
consultation is set to end on 26 June 2019).

Peter Wilson of RemortgageQuotesOnline.co.uk commented: “This is a very exciting development that will be helping thousands of homeowners across the UK. We have a lot of good homeowners who have been keeping up with their mortgage repayments for years, but have been tied down to unfavourable rates because their banks have gone bust or their debt has been sold onto another party. This modified assessment could finally provide these good credit, well-paying homeowners the lower rates that they deserve.�

Alongside its recommendations for implementing
a modified assessment to help address the mortgage prisoner issue in the UK,
the FCA is also intending to create a comparison site. This website, which will
be an unbiased intermediary comparison site specifically for mortgage and
pensions, will be designed to provide transparency for consumers. It intends to
create a website free of bias that often exists on comparison sites and their
partners elsewhere on the web.

The FCA said: “We believe this will
incentivise intermediaries to use more lenders. This should drive up quality
among intermediaries and improve competition between them (as well as
competition between lenders). This might also help consumers referred to an
intermediary by estate agents and/or developers. Consumers would be better
placed to identify whether that intermediary offers the level and quality of
service that they want.”

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