UK Finance director of mortgages Jackie Bennett (pictured) said the FCA had signalled its willingness to take into account a more relative affordability test for these customers, which will be consulted on this spring.
Speaking at the Annual Scottish Mortgage Lunch, she noted that this will allow active lenders to offer remortgage products for customers of closed books.
However, Bennett explained that not all customers are likely to benefit as some will have circumstances that are likely to put them outside of the commercial risk appetite of lenders.
She added: “This might include customers who are in arrears, in negative equity or have considerable other debts.
“Customers may have other reasons for not wanting to switch if they have a low balance or a short time left on their mortgage.
“That is why alongside any changes the FCA makes we believe government and FCA should ensure that the FCA has sufficient powers to protect customers who can’t or won’t switch, particularly where the book owner is not regulated.”
‘No need for pricing intervention’
Bennett also highlighted that there had been a more wider debate about customers on lender back books and said there was no need for regulators to intervene as the industry was reacting positively.
This included the Competition and Markets Authority (CMA) examining standard variable rates following a Which? super complaint.
“We don’t believe this is an area where there should be a pricing intervention,” she said.
“Lenders have made considerable strides in contacting customers both pre- and post-the end of a fixed term and made it easier for people to switch on to a new rate.
“This is demonstrated by the nearly £150bn of product transfers carried out in 2018 which is in addition to £87bn of remortgaging in the residential mortgage market.
“Within this just over half of customers take advice when they do a product transfer. Taking product transfers and remortgaging together, this means that almost one in five customers switched their mortgage in 2018.”
Clarity on Help to Buy Scotland
Bennett also called for clarity on the future of the Help to Buy Scotland scheme, to avoid potential disruption if the scheme ends or new arrangements are put in place.
She noted the increase in the land and building transactions tax additional homes supplement from three to four per cent announced in the Scottish Government Budget 2018-19 recently is likely to add to the cumulative burden on Scotland’s private landlords.
Bennett said: “We are seeing the impact of regulatory and other fiscal change on the buy-to-let sector, and there is a concern that an unintended consequence of the changes could be professional landlords leaving the sector, impacting the private rented sector more broadly and putting more pressure on people’s housing choices.
“Our members continue to have a healthy appetite for private lending and investment in Scottish housing associations. Their confidence in this market is derived not only from the certainty of government grant but also from the strength and robustness of the regulator’s approach.”
Remortgaging to continue strongly
During the speech, Jackie Bennett pointed out that in Scotland remortgages hit their seven-year high in 2018, with £4.5bn completed, 13.8% higher compared to 2017.
First-time buyers and home movers saw more modest growth in Scotland.
Year-on-year figures showed £4bn of new lending in the year for first-time buyers, two per cent more than in 2017, and £5.5bn of new lending for home movers, 1.5% more than in 2017.
Bennett noted that how the mortgage market performed this year would be somewhat dependent on Brexit and what impact that had on funding markets, general economic conditions and consumer confidence.
“We expect remortgaging and product transfers to continue to be strong in 2019 as it was in 2018, as previous two and three-year fixed rate products come to an end,” she continued.
“But with a move to over half of all new mortgages going on to five-year fixed rates the rate of churn will not continue at the same level into 2020.
“We also expect that the buy-to-let market will continue to see the impact of the tax, legislative and other changes continuing to be felt particularly as landlords are now paying their increased tax bills.”