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Our response to the FCA’s mortgage customers: Proposed changes to responsible lending rules and guidance

We support the FCA’s principle of making it easier for some people who are currently unable to switch (“mortgage prisoners”) to be able to move to more affordable mortgage deals.

However, we note that few of our clients (who would potentially benefit from switching) would be able to take advantage of the proposed changes.

No support for those with mortgage arrears

Those of our clients with mortgage arrears will remain ineligible to move to a more affordable deal, either with their current lender or another provider, under the current “up-to-date” with payments over the previous 12 months clause. These clients are financially vulnerable and working with us to repay their mortgage arrears.

A more affordable mortgage deal would ensure they could repay arrears more quickly and/or reduce any other debts or arrears. The FCA should consider how better outcomes for these customers could potentially be achieved, over and above current forbearance rules.

No obligation on lenders to offer better deals

There is also no obligation on lenders to offer better deals to “mortgage prisoners” who are currently trapped on high standard variable rates. Some active, regulated lenders have not signed up to the voluntary agreement to offer lower rates to existing mortgage customers.

On top of this, the offer of a better deal to new customer “mortgage prisoners” is purely dependent on the commercial risk appetite of the lender. Although the negotiation of the voluntary agreement amongst authorised lenders is a positive step forward, it doesn't address the problems of those customers of inactive lenders or unregulated firms who are currently unable to switch.

Our recommendations

The FCA has already accepted the principle of price intervention where vulnerable consumers are concerned (in the rent-to-own credit market). We recommend a similar approach in the mortgage market.

In the case of authorised lenders, it's within the FCA’s current powers to provide a more effective solution. In the case of mortgage loans that have been sold to firms that aren't authorised for mortgage lending, so currently outside the FCA’s control, there's a case for the FCA to work with HM Treasury to support new legislation to ensure this detriment is stopped and prevented from affecting current and new mortgage customers in the future.

If it's agreed that mortgage lending should be regulated, it should be the whole mortgage market that's covered by this regulation.

Read our full response and recommendations.

Download our response

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