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FCA looks to relax rules for mortgage prisoners

The FCA is consulting on the proposed implementation of a ‘modified affordability assessment’.

The new assessment aims to help borrowers trapped on their current mortgage deal – otherwise known as ‘mortgage prisoners’.

The regulator says in a paper issued today that, for the proposed modified assessment to take place, the mortgage borrower in question would have to be up-to-date with their payments, would not looking to borrow more money, and would wish to stay in the same property.

The modified assessment would see a relaxation of rules that were introduced via the mortgage market review and the mortgage credit directive.

Specifically, the FCA says that during a modified assessment, the lender could disapply the rules that require lenders to verify a customer’s income and what the lender should consider when considering essential expenditure, the rules that ask a lender to take into account any likely future changes in a customer’s income, and the regulation that asks for an interest rate stress test

Regarding interest-only mortgages, the modified assessment would allow a lender to ignore the rule that asks for a customer to have a credible repayment strategy, although the lender would still need to review and contact the customer at least once during the term of the mortgage

The FCA is also proposing that those moving home, such as downsizers, should be able to change to a new mortgage deal via the modified assessment.

As well as this, the regulator is considering asking lenders (of all stripes, along with administrators acting for unregulated entities) to contact relevant customers regarding the rule changes and with potential risks outlined.

In all, the FCA estimates that there are 10,000 borrowers with an authorised firm trapped on a rate, 20,000 with authorised firms who are no longer lending, and 120,000 who are with firms not authorised to lend.

The consultation will end on 26 June 2019.

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