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Mortgage prisoners will find it tougher to escape costly deals – FCA

  • 29/09/2020
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Mortgage prisoners will find it tougher to escape costly deals – FCA
The Financial Conduct Authority (FCA) appears to be stepping down its demand for the regulatory oversight to be widened to include all inactive mortgage lenders.


It also warned that with “worsening market conditions” it was likely to get harder for mortgage prisoners to find an escape route from their expensive loans as action had been delayed.

The move came in its annual perimeter report where the regulator considers the extent of its oversight and issues which may be supported by a wider remit.

In last year’s report, the regulator admitted that unregulated mortgage book purchasers were able to avoid complying fully with its customer protections if they structured sales in certain ways.

In its latest version published today, the FCA acknowledged that extending the perimeter to include all mortgage lending “could potentially help the relatively small number of borrowers where the unregulated entity has not delegated key decision-making responsibilities to a regulated firm if harms were to arise.”

And it added that such a move would be useful if more lenders sold their books to unregulated firms.

However, the regulator instead argued that a perimeter change was unlikely to solve all the problems that have been raised by mortgage prisoners.

“As an example, an extension to the perimeter could not guarantee that borrowers are offered a cheaper deal by their existing lender or enable them to switch,” it said.

“More generally, even with a perimeter change, the purchasers of mortgage books are unlikely to have the business model or funding to support the offering of new deals to existing customers.”


Tougher times ahead

The regulator continued by discussing measures it had taken, including relaxed affordability assessments and greater product switching options, but noted lender action had been delayed by the coronavirus pandemic and was likely to be tougher for prisoners to find a new deal.

“Worsening market conditions are likely to impact on firms’ risk appetites and the availability of switching options but we still expect our modified affordability assessment to help some mortgage prisoners,” it said.

The regulator concluded: “Our focus is working with industry to implement our rule changes as well as evaluating and assessing the impact of these interventions.

“We will continue to monitor this issue and to discuss this area along with our findings with the Treasury.”


Treasury failed to act

Widening the regulator’s regime to include closed book and inactive or unregulated mortgage lenders has often been cited as a vital way of helping to ease the mortgage prisoner crisis.

In June 2019 then-FCA chief executive Andrew Bailey told the Treasury Select Committee that regulating all mortgage lending was possibly the only way to fully help mortgage prisoners.

“I don’t know of another solution to this, honestly. We do authorise mortgage administrators but I don’t think it works to go through that channel in the way we would both probably want to achieve,” he said.

However, despite making positive statements, HM Treasury has failed to bring any legislation to Parliament to enable this and repeatedly rebuffed campaigners calls for other support.

In March Bailey said he had come to the conclusion that government will not change the regulatory perimeter to help mortgage prisoners, so all he could do was “get the megaphone out”.

Incoming chief executive Nikhil Rathi also pledged that helping mortgage prisoners was a priority.

Now the FCA appears to have eased its pressure for an extension into this area.



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