Debt charity StepChange has recommended the government takes a “stronger approach” to helping mortgage prisoners as part of its response to the regulator’s consultation on the issue, the closing of which came yesterday.
While the charity says that it supports making it easier for mortgage prisoners to move to a more affordable deal, it adds that “few of our clients” would qualify to take part in the proposed changes.
The proposed rules published by the FCA state that only borrowers who, alongside other parameters, are up-to-date with mortgage payments would qualify for changes to the affordability assessments that would help them move to a better deal.
The regulator describes less than 1 per cent of mortgage balances currently being in arrears.
StepChange argues that a more affordable mortgage would allow borrowers in arrears to repay their debt more quickly, and that the FCA “should consider how better outcomes for these customers could potentially be achieved.”
It continues by highlighting the fact that the proposed changes do not include any obligation for a lender to offer a better deal, and so borrowers stuck with an inactive lender or unregulated firm would not be helped.
It asks for the regulator to work alongside the Treasury to come up with a solution to this.
“It it’s agreed that mortgage lending should be regulated, it should be the whole mortgage market that is covered by this regulation,” the charity concludes.
In further news, the Building Societies Association has published its own concerns regarding the proposed changes.
Saying that the FCA’s approach is “a step forward”, it also points out that when looking at customers who are with an inactive or unregulated lender, “virtually no information about the mortgages, the borrowers or the interest rates being charged on these books is currently available.”
The BSA adds that when existing mortgage books are sold, as has happened a number of times recently, customer protection “extending to interest rates” must be applied.
“The BSA, as well as the FCA, recognises that these borrowers have fewer safeguards than those with regulated lenders and this needs to change. The government must act now to ensure that these borrowers are subject to the same regulatory protections as they were when they first took out their mortgage,” comments BSA head of mortgages and housing Paul Broadhead.
“Building Societies will participate actively in the cross-industry implementation group that the FCA is setting up to move things forward. I would love this issue to be simple and straightforward but it isn’t,” he adds.