However, Bailey also warned that those people who have built up substantial arrears are unlikely to be helped by the changes being proposed and the regulator does not have an accurate number of borrowers in this situation.
When questioned by MPs on the Treasury Select Committee (TSC) Bailey said he did not know how many this would be but said the FCA would supply the committee with an approximate figure.
The FCA has previously said it could not change the rules around affordability assessments because of the European regulations introduced as part of the Mortgage Credit Directive.
However, Bailey said that after discussions with Treasury both bodies “reached the conclusion that it is an acceptably safe re-interpretation of that test and we’re within the spirit of it”.
When asked by TSC chairwoman Nicky Morgan how long the changes would take to implement, Bailey said: “There’s no reason to hang around on this at all so we’ll get on with it.”
He added that once approved it could be implemented by lenders “fairly quickly” as it did not involve technology systems changes, just changes to processes.
And Bailey said that while the FCA could not impose a non-commercial approach on a lender, there was “a lot of good will” and that “there’s a desire to solve this”.
Long-term arrears unknown
Bailey also noted that the changes would not help those customers who have accrued long-term arrears as a result of the situation they have been put into, suggesting this may require government action.
“It is I’m afraid also likely that there will be a set of customers in long term arrears that this probably won’t solve the issue for and it will need to be brought into a broader public policy response,” he said.
When quizzed about how many people this would leave trapped, Bailey admitted the FCA did not have “precise modelling but can send rough and ready figures.”
He later added: “We will do our best to come up with an estimation of the arrears point.”
Protections in future book sales
Responding to TSC member Rushanara Ali, Bailey admitted there were protections that could be put in place for customers, such as movements of the standard variable rate (SVR).
“This is an issue for the contract for the sale. We have been involved in discussions with government around what protections can be put in to contract,” he said.
“You can put protections in such as the scope to move the SVR around for example.
“You can put a number of contractual protections in to that sale which I think would be important,” he added.