In its risk outlook document for 2014 the regulator said the characteristics of these borrowers suggest they take out levels of debt they cannot afford which eventually prevents them meeting their monthly mortgage payment.
Borrowers with these characteristics or past payment or impairment problems account for 1.1m mortgage holders.
Following the financial crisis, lenders were encouraged to increase their forebearance to allow borrowers to stay in their homes because of tough financial conditions.
But following its research the FCA has found taking out subsequent debt, not the initial mortgage, caused the borrower to default in many cases.
And lenders’ leniency towards borrowers in these cases was found to only extend the time between when the borrower took out their last secured loan to the date of repossession.
Extending the mortgage term is one approach agreed by lenders and consumers to lower the cost of monthly repayments.
But the regulator has warned this could lead to an “affordability stretch” if real incomes do not improve.
The FCA is encouraging firms to consider the broader debt profile of a consumer when assessing the sustainability of the loan, such as difficulty maintaining payments in the past.