Options for trapped borrowers increase as FCA intervention looms
In a speech in November 2018, FCA executive director of strategy and competition Christopher Woolard raised the subject of mortgage prisoners as a “major concern”.
Since then, UK Finance has spoken out on the subject and the FCA has announced that it is preparing to publish a consultation paper this spring, which will seek options on delivering a more proportionate affordability assessment. It later added that it intends to “get on with” addressing the issue.
This forthright commentary implies that regulatory change is inevitable. However, many in the industry believe that brokers should take action now rather than wait for intervention from the regulator.
CLS Money managing director Clayton Shipton says: “I would recommend that every broker should be going back to their client banks [to] look for the cases where they have been unable to help customers in the past.
“By making them aware that their advisers are working hard behind the scenes for them in this way, they will not only retain the loyalty of those customers but also provide another opportunity to undertake a review of other needs.”
Brightstar chief executive Rob Jupp takes a similar view, saying that ‘prisoners’ may have options they don’t know about, “and lenders have improved the way they assess income for the self-employed, contractors and people earning income from multiple sources”.
“It is worth revisiting your client base to make sure you have explored every avenue and that they haven’t written themselves out of a market they could still access,” he says.
London & Country associate director David Hollingworth points out that recent competition has led to more options and more expansive criteria, which are “positives that brokers can highlight to mortgage prisoners that may have reviewed their mortgage some time ago and assume that there will still be nothing on offer”.
He says that the FCA’s idea to approach affordability assessments is encouraging but warns that “it will deliver little if lenders don’t adopt the changes and open up a greater choice of products for trapped borrowers”.
This positivity tempered by caution is echoed by Coreco Group director Andrew Montlake who says: “We need to make sure that these borrowers get proper advice and lenders have clear guidelines around what they are allowed to consider. This should include protection from future claims if borrowers move on this basis.
“Likewise, compliance teams in networks and brokerages need the same guidance so we can advise people properly and make sure the days of being forced to languish on a higher rate, especially when this is just due to a sale of a mortgage book to an unregulated provider, is a thing of the past.”
London Money director Martin Stewart has a different take, saying that it is the dramatic change in living habits over the past decade that has made people prisoners – and of their own circumstances rather than “anything detrimentally thrown at them by their bank”.
“Changes via the MMR and the MCD reshaped the landscape of lending – and quite rightly after previous excesses,” he says.
“As an industry let’s educate the consumer about these changes, the implications to them should they become real and then, most importantly, create solutions so that each and every borrower is treated as equitably as can be arranged. Everyone deserves parole for good behaviour.”