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Ipswich calls for U-turn on MCD rule for mortgage prisoners

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  • 30/04/2015
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Ipswich calls for U-turn on MCD rule for mortgage prisoners
Ipswich CEO Paul Winter is calling for a reversal of the FCA's decision to prohibit lenders from using the transitional rules for new borrowers.

The revision was announced when the final rules were published on 27 March which detailed the changes needed from the mortgage market to comply with the European Mortgage Credit Directive (MCD).

Up until then, borrowers could move to a new lender without going through a full affordability assessment as long as the loan sum remained the same. This privilege is now only available to borrowers remortgaging with their existing lender.

The thinking behind this was that it would be unfair to penalise a customer who paid their mortgage on time every month but their personal circumstances meant they fell outside the tougher terms imposed by the Mortgage Market Review.

“We are calling for the MCD decision to be reversed so that borrowers who would otherwise be considered good customers are not disadvantaged when it comes to obtaining the best lending deals,” said Winter.

“There are almost 800,000 mortgage prisoners across the UK – including older borrowers, the self-employed and those who have experienced life changes. It should not be the case that those who are approaching the end of a deal are forced to continue on a more expensive SVR rate and are denied choice and entry to an otherwise competitive market. We’re calling for a more inclusive approach to mortgage lending,” he added.

The statistics came from Resolution Foundation, campaigners for living standards, which found that 770,000 customers were trapped on lenders’ Standard Variable Rates and were unable to access a new deal.

Lenders had shown little interest in using the rules which stated that they could exercise discretion when assessing affordability and interest-only mortgages for existing borrowers and borrowers from other lenders.

But shortly before the FCA’s U-turn the Ipswich and Melton building societies released ranges to help borrowers switch lenders under transitional provisions.

Both lenders have said they will continue to offer this facility until March 2016 when the directive is integrated into UK law.

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