It is estimated tens of thousands of so-called mortgage prisoners are unable to switch to a cheaper deal because they no longer meet stricter affordability requirements.
Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), last week admitted to MPs that preventing someone moving to a cheaper deal on the basis they can not afford it is “bonkers”.
The Treasury Select Committee’s Rushanara Ali asked Bailey how many of these borrowers are at risk of repossession because of mortgage payments that could be hundreds of pounds more expensive than necessary.
She said: “Even for those who are on good incomes this would be a struggle.”
But Bailey was unable to provide any answers.
Ali suggested a hardship fund could be created for those at risk of having their homes repossessed.
Borrowers in limbo
The FCA’s recent interim mortgage raised the suggested borrowers with active lenders should be able to move to a cheaper deal without going through full affordability checks.
Ali also asked how the FCA proposes to help homeowners with inactive lenders.
Bailey said he has had discussions with inactive lenders about their policies and will have further talks with the government in an effort to bring these borrowers the same solution as those with active lenders.
He said: “You have my commitment that we will look for every way we can to try and solve this issue.”
But Ali pressed Bailey for timescales and said borrowers have been left in “limbo land”.
She added: “There just doesn’t seem to be a sense of urgency.”
Bailey admitted that he did not have timings for when solutions might be available and would have to “come back” to the committee.
Ali also asked whether the UK is correctly interpreting the EU Mortgage Credit Directive, which has been blamed for the lack of flexibility in relation to mortgage prisoners.
Bailey said the regulator and the Treasury had looked at this point several times, but not concluded that they had over-interpreted the rules.