The subject of mortgage prisoners has raised its head again. The Association of Mortgage Intermediaries has flagged the issue in its latest quarterly economic bulletin.
It is a big problem. Ami estimates up to one million houses are owned by mortgage prisoners, although the exact number is unknown. The issue seems set to rumble on until the Government steps in or lenders change their behaviour.
On the first point, there is now a question over the political will for change. Consumer champion Martin Lewis took up the cudgel for mortgage prisoners in 2015 and led a successful campaign in which a major victory was meeting with then Chancellor George Osborne, who sent letters to lenders encouraging them to reduce the problem of mortgage prisoners.
Of course, as Osborne is now the former chancellor there is no way of knowing how far up the agenda mortgage prisoners will feature for his replacement, Philip Hammond, although Lewis is still campaigning.
So that leaves the second option: for lenders to change their approach to remortgagors. The Mortgage Credit Directive says lenders must apply strict affordability checks. But the rules allow lenders to waive these checks for existing customers as long as they do not want to borrow more and have kept up with repayments.
The issue, as brokers well know, is how lenders apply this waiver. The FCA put out a report in May saying it was satisfied lenders were treating remortgagors fairly. But brokers, and Ami, suggest otherwise, particularly for customers of the larger lenders.
This has led to situations where some borrowers are told they cannot afford a remortgage even if it is cheaper than their existing rate, which John Charcol’s Ray Boulger rightly calls “stupid rubbish” that makes lenders look “ridiculous”.
The issue is complicated. But lenders of all sizes should be more willing to waive the affordability checks and the FCA should reassure them that they will not be punished at some future date for doing so.