The FCA\u2019s new proposal\u00a0suggests\u00a0that mortgage lenders could choose to carry out a more \u2018proportionate\u2019\u00a0affordability assessment, for borrowers that are up\u00a0to\u00a0date with their mortgage payments and want a better mortgage deal on their current home\u00a0without additional borrowing.<\/p>\n
It\u2019s estimated\u00a0that\u00a0150,000 mortgage prisoners in the UK\u00a0cannot\u00a0remortgage\u00a0because their\u00a0provider\u00a0has\u00a0told them that they\u00a0cannot\u00a0afford to;\u00a0despite making regular mortgage payments and almost certainly remortgaging onto a cheaper rate to reduce their\u00a0payments.<\/p>\n
The Mortgage Credit Directive, an EU rule, means that anyone applying for a mortgage\u00a0\u2013\u00a0even if they already have\u00a0one \u2013\u00a0are\u00a0subject to strict affordability checks to scrutinise their income and outgoings.\u00a0\u00a0The\u00a0FCA\u00a0proposals\u00a0designed to address the problems this has caused in the\u00a0UK\u00a0include:<\/p>\n
Even\u00a0if they don\u2019t meet the affordability requirements, eligible\u00a0borrowers can switch to a new deal if it is more affordable than their existing one. Lenders\u00a0will not\u00a0be required to \u2018stress test\u2019 these borrowers, which assesses whether the borrowers could cope if interest rates rose by 1% each year for the next five years, and they\u00a0would also be able to apply these new rules to interest-only mortgage holders.<\/p>\n
Approximately 140,000 mortgage prisoners hold a mortgage with unregulated or inactive lenders. The FCA doesn\u2019t govern unregulated lenders, so it\u2019s harder to help their borrowers, and mortgage holders with inactive lenders and unable to remortgage with another provider due to affordability assessments have nowhere to go.<\/p>\n
The new rules\u00a0propose\u00a0that these lenders contact\u00a0their\u00a0residential\u00a0mortgage\u00a0customers\u00a0to let them know that they can switch,\u00a0if they are on a reversion rate and\u00a0have\u00a0kept\u00a0up to date with payments for the past 12 months.<\/p>\n
If a customer switches under the new relaxed affordability rules, the new lender must\u00a0inform\u00a0them how their mortgage has been judged to be affordable,\u00a0and advise that the\u00a0affordability assessment does not take into account early repayment charges and they could end up paying more on a higher reversion rate or in interest if their mortgage term is longer.<\/p>\n
Christopher Woolard, executive director of strategy and competition at the FCA, said: “We are particularly concerned about consumers \u2013 who\u00a0are commonly referred\u00a0to as mortgage prisoners – who are currently unable to switch.\u00a0 That is why we are acting now to help remove potential barriers in our rules. These changes should make it easier for consumers to get a more affordable mortgage.”<\/p><\/blockquote>\n
The FCA proposals will\u00a0be consulted\u00a0on until 26 June.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Financial Conduct Authority (FCA) has begun its consultation on relaxing mortgage affordability rules, which could mean thousands of mortgage prisoners are a step closer to\u00a0freedom. The FCA\u2019s new proposal\u00a0suggests\u00a0that mortgage lenders could choose to carry out a more \u2018proportionate\u2019\u00a0affordability assessment, for borrowers that are up\u00a0to\u00a0date with their mortgage payments and want a better mortgage… Read more »<\/a><\/p>\n","protected":false},"author":3380,"featured_media":4023424,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[26,6],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/4023423"}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/users\/3380"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/comments?post=4023423"}],"version-history":[{"count":1,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/4023423\/revisions"}],"predecessor-version":[{"id":6097576,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/4023423\/revisions\/6097576"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media\/4023424"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media?parent=4023423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/categories?post=4023423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/tags?post=4023423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}