The Financial Conduct Authority (FCA) believes the mortgage market is generally working well but has targeted several key areas which it believes can be improved.
Publishing the final report of its Mortgages Market Study, the FCA confirmed its findings from the interim report last year.
It found that: “the mortgage market is working well in many respects but falls short of the FCA’s vision in some specific ways”.
The report includes a consultation on overhauling affordability calculations to allow mortgage prisoners to switch to cheaper products with active lenders.
And the regulator will force the current inactive lenders to tell mortgage prisoners’ about the changes if they are eligible.
Concerns in this area have been rising for several years and the FCA and HM Treasury finally confirmed they were going to act earlier this year.
Proportionate affordability assessment
The regulator 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 said it was 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.
In addition to the mortgage prisoners consultation, 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.
High levels of engagement
FCA executive director of strategy and competition Christopher Woolard 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.”
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Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.