There’s been a warm welcome from the property and consumer sectors for a suggestion that the Financial Conduct Authority may be moving to help some 140,000 so-called ‘mortgage prisoners’.
These are borrowers who are completely up to date with their mortgage payments but are effectively trapped on high interest-rate home loans from unregulated or inactive firms - this means they are unable to switch to cheaper loans available from regulated lenders.
Under the strict rules imposed on regulated lenders by the FCA in 2014, affordability checks effectively excluded these mortgage prisoners from switching.
Now, in a letter to the Treasury Committee of MPs chaired by Conservative MP Nicky Morgan, the FCA chief executive Andrew Bailey says the strict rules will be applied only to those seeking to borrow additional sums - not those who want to borrow the same sum from another lender whose rates are lower.
"The test would be whether the new mortgage costs are more affordable than the current mortgage costs" says Bailey in the letter - which you can see here.
Nicky Morgan herself says: "The regulator must now act swiftly to help these 140,000 mortgage prisoners and not … kick the issue into the long grass.”
And Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: “While we welcome news that the FCA is working to change the current system, how lenders interpret and apply any changes will be of equal importance. After various regulatory changes we have seen many ‘unintended consequences’, one of which led to mortgage prisoners in the first place.”
Martin Lewis, founder of MoneySavingExpert, comments: "Finally, a welcome and sensible move. For over four years we've been saying that it's ludicrous that people are failing affordability tests because they're absurdly told they cannot afford a cheaper deal than the one they're already on.”
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