In a thematic paper out this morning, Embedding the Mortgage Market Review: Responsible Lending Review, the FCA confirmed none of the lenders it assessed had ever used the transitional arrangements for new borrowers originally intended to stave off the possibility of mortgage prisoners.
The transitional arrangements were intended to allow lenders to waive the affordability check for new borrowers applying for the same amount, with a good payment history and where the borrowing made no material changes to affordability.
The regulator said instead, it found most lenders were finding a variety of different solutions for their borrowers. Some lenders ‘re-route’ these borrowers at an early stage but others still conduct a full affordability assessment. However, the FCA was generally satisfied lenders are finding solutions for customers at deal-term end.
The FCA said: “Most lenders have such strategies to retain customers by informing them of the product options available in a timely fashion and making switching as straightforward as possible.”
The Mortgage Credit Directive, which became law on 26 April, overturned the transitional arrangements laid out in the Mortgage Market Review, meaning lenders once again had to affordability test all new borrowers.
Brokers and even Moneysavingexpert’s Martin Lewis have campaigned for a way to avoid making ‘mortgage prisoners’ of thousands of borrowers as lenders fail to waive affordability checks afraid of being caught out later by the regulator.
Smaller lenders, like Ipswich Building Society, have generally been more willing to use the transitional arrangements but big lenders have come under fire for not applying them, despite being publicly criticised by the FCA.
Robert Sinclair, CEO, AMI said: “It is great news that the FCA has found that the mortgage market is now lending responsibly and that there are no issues with mortgage prisoners. This appears at odds with broker experience and that of the renowned consumer champion Martin Lewis, so no doubt the Chancellor will be assured by the FCA there will be no issues when interest rates rise.”