The financial regulator has admitted it “cannot make sense” for affordability rules to stop so-called mortgage prisoners from switching from Standard Variable Rates (SVR) to a cheaper deal.
Stricter lending criteria introduced since the financial crisis meant many mortgaged homeowners no longer qualified for lender deals.
As a result, people in this position had little choice but to remain on lenders’ pricey SVR rates.
The Financial Conduct Authority (FCA) is now looking at its regulation to see if additional flexibility can be provided to help people move to better deals, according to Christopher Woolard, executive director of strategy and competition.
Speaking at the UK Finance Annual Mortgage Conference, he said: “From our side, we are challenging ourselves to look at improving our regulation so it isn’t a barrier to customers switching.
“Affordability is integral to our responsible lending rules. And it would not help anyone to switch to a mortgage they cannot afford.”
He added: “It cannot make sense to deny a cheaper deal to someone who has maintained a good record with higher payments.”
However, Woolard said there also needs to be more effort from across the industry to “offer re-mortgaging opportunities to those who currently don’t seem to have them”.
He added: “That’s not to say that every trapped borrower will be eligible. For some their specific circumstances will mean that no lender is likely to consider that a new mortgage is an appropriate risk.
“But it’s clear this isn’t the case for all those who find themselves trapped.
“So we expect firms to engage with this work as we move forward, and to consider the opportunities to take on these customers.”
Earlier this year there was an agreement among providers representing 90% of the industry to offer cheaper deals to their customers stuck on SVRs.
More help needed for consumers
Woolard also used the speech to address the FCA’s mortgages market study.
He reiterated the points of the interim report, which found around 30% of consumers could have taken a cheaper mortgage with the same key features, saving around £550 a year.
Woolard said: “There’s more to do to ensure consumers can easily see which mortgages they qualify for.
“So we put forward a package of remedies designed to tackle these challenges. We will publish the final market study report in the first quarter of the New Year.”