The FCA is consulting on whether to change its responsible lending rules to help mortgage prisoners, according to the Mortgages Market Study (MMS) published today.
The regulator confirmed that most mortgage prisoners are with inactive firms and that “most (but not all) mortgage prisoners took out their mortgage or last switched before the impact of the financial crisis.”
It reiterated its commitment to helping consumers who have mortgages with inactive firms and cannot switch despite being up-to-date with payments and are not seeking to borrow more. It said that, during consultations, lenders had reported that regulatory barriers were one of the obstacles facing mortgage prisoners.
The difficulties facing mortgage prisoners, particularly those trapped by the government’s sale of mortgage books to inactive lenders, have been well-documented by Mortgage Solutions and the regulator said in today’s report:
“Lenders have said that barriers include our rules that require firms to demonstrate, based on an assessment of income and expenditure, that the consumer will be able to afford the mortgage including under a stressed interest rate scenario,” the regulator said.
It went on to hint that this rule could be revised to allow lenders to put greater emphasis on the consumer’s track record of payments when testing to see if they met lending criteria.
The regulator said it would “explore the extent to which lenders could place greater reliance on consumers’ past track record of making mortgage payments when demonstrating affordability.
“We are consulting on changes to our responsible lending rules to deliver a more proportionate, modified affordability assessment for consumers who are up-to-date with payments on their existing mortgage and who are looking to switch to a more affordable mortgage without borrowing more.”
It also said it wanted to do more to protect consumers whose mortgages are with firms that are not authorised to lend:
“We want to be better informed about consumers whose mortgages are with firms that are not authorised to lend and are outside our perimeter. So, we have also consulted on changes to the mortgage reporting requirements on mortgage books that have been sold to unregulated entities.”