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Work to do on mortgage prisoners and closed books despite good FCA report – Bennett

by: Jackie Bennett, director of mortgages at UK Finance
  • 09/05/2018
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Work to do on mortgage prisoners and closed books despite good FCA report – Bennett
After months of anticipation, the FCA has published the interim findings of its mortgage report and UK Finance is pleased to say these are largely encouraging.


Consumer engagement is high and our members – which span banks, building societies, specialist lenders and third-party administrators – are committed to lending responsibly and dealing with customers fairly.

Effective competition in the market, through diverse product ranges and easy switching services, is working well for the vast majority of consumers.

But the mortgage industry cannot rest on its laurels and there are still improvements to be made.


Supporting mortgage prisoners

The FCA found that while for many the market is working well, there remain a number of borrowers –  so-called mortgage prisoners – who would benefit from switching from their reversion rate but are unable to move on to a new product.

Importantly, the regulator highlighted that “this is not a case of historic breaches of lending rules, nor a judgement about the use of reversion rates in the mortgage market”.

The figures show there are around 30,000 customers locked in with authorised lenders. This equates to less than 1.5% of all outstanding Standard Variable Rate (SVR) loans. However, that is not to say that more cannot be done.

We will actively work with our members and the regulator to explore possible solutions.


Regulating unauthorised loan books

But what about the estimated 120,000 borrowers on books that are owned by unauthorised owners over which the regulator has no remit?

It would be positive if those owners took action voluntarily but perhaps the time has now come to consider whether regulation is necessary for this cohort, ensuring consistent treatment for customers across the board.

The FCA also wants the market to make it easier for consumers to compare products, find the right mortgage and access support about the advice they receive.

Much important work has been carried out by the mortgage industry to improve our market following the years after the financial crisis.

There have been significant leaps forward in consumer protection and product choice as well as improving technology, which has meant that there are better ways of searching the market for both consumers and intermediaries.


Restore consumer confidence

Following the implementation of the Mortgage Market Review (MMR) lenders and intermediaries have worked tirelessly together to embed responsible lending and restore consumer confidence in the sector.

We have a strong market which meets the increasingly complex needs of consumers and is probably the most innovative in Europe, if not the world.

This year, we expect gross mortgage lending to be around £260bn, the highest figure in a decade, lent in a responsible and safe manner.

That is something we should all be proud of, but we can, and will, work together to improve even further.

Talk of a potential Bank of England base rate rise in the near future means it is now more important than ever that the mortgage market supports its customers in making the right financial decisions.

We will be working through the FCA’s recommendations with our members and continuing to engage closely with the regulator and other stakeholders over the coming weeks as we respond to the consultation.

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