The Financial Services Consumer Panel is calling for the Financial Services Authority to introduce specific rules to help mortgage prisoners.
In its response to the Mortgage Market Review final consultation paper the FSCP calls on the regulator to strengthen transition arrangements as it believes many borrowers whose current mortgages may fall foul of the proposed new rules will need help if they attempt to re-mortgage.
The vulnerability of mortgage prisoners has been highlighted recently following the increase in a number of lenders’ SVRs. The FSCP believes that the FSA should introduce a new rule specifically to protect these consumers.
The FSCP also believes that unless the FSA is fully confident on the basis of solid empirical evidence that consumers would not be harmed by prompt implementation, the new responsible lending requirements for the whole market should not be brought into effect until the housing market has demonstrably recovered.
It adds that the potential for the MMR proposals to further restrain lending at a time when underwriting standards are already tight would be detrimental to consumers.
Adam Phillips, chairman of the FSCP, supports stronger regulation and praises the FSA for listening to consumer groups in the MMR process.
He says: “We still have some suggestions for improvements but overall we are very pleased with the FSA’s proposals and the progress made from the initial consultation. The FSA must be praised for having listened to both industry and consumer groups.
“However, we remain extremely concerned that many people, in particular those affected by the recent rises in lenders’ SVRs, will find the increase in their monthly mortgage repayments financially challenging.
“These increases are inconsistent with the principle of Treating Customers Fairly and could be addressed if the FSA were to consider introducing a new rule as we suggest. Otherwise significant numbers of consumers stand to suffer detriment.”