UK Finance has called for reassurance from the Prudential Regulation Authority to ensure that lenders do not fall foul of its rules when seeking to help mortgage prisoners.
In its response to the FCA’s consultation on proposed changes to responsible lending rules to help free borrowers trapped on expensive deals, the lender trade body argues that its members are facing a number of barriers.
UK Finance says: “It is important that there is a full understanding of the interplay between these proposed changes and the FCA handbook and other regulatory requirements, e.g. the limit of lending at an income multiple of greater than 4.49x.
“We would welcome confirmation in the final policy statement that the Financial Policy Committee and the Prudential Regulatory Authority are fully cognisant of the changes to affordability assessment proposed.”
The trade body points out that lenders have to ensure that they are meeting the capital requirements and working within the risk weightings allowed by the PRA.
It warns that by taking on mortgage prisoners who are on interest-only deals, which require a high proportion of capital to satisfy regulations, firms may have to reduce the amount they lend to first-time buyers.
UK Finance also calls for the third-party administrators that currently have mortgage prisoners on their books to supply data on these customers as soon as possible so that lenders can begin to look at product options.
Currently administrators will not be required to report this data until late 2020.
It says: “The proposals are intended to allow the customers of closed book lenders to move to an active lender in order to obtain a lower rate of interest on their mortgage debt.
“However, UK Finance has very little information about the characteristics of the customers and the mortgages that are held by entities that are not authorised home finance lenders.”
Director of mortgages Jackie Bennett says: “The regulated mortgage industry wants to help eligible customers with unregulated or inactive lenders switch to a better deal.
“We support the FCA’s ambition in its proposals for greater flexibility over affordability assessments and are keen to work closely with the regulator in a joint implementation group to help those firms who want to participate and work towards a common launch date.”
She adds: “We will continue to work with the FCA and government to consider what more could be done to help customers in closed books who will not qualify for a new mortgage under the new proposed rules.”