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Just 200 mortgage prisoners helped by FCA affordability changes

  • 29/11/2021
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Just 200 mortgage prisoners helped by FCA affordability changes
Only 200 borrowers on closed and inactive books switched onto new deals as a direct result of the Financial Conduct Authority (FCA) allowing lenders to make changes to affordability assessments.


In its mortgage prisoner review, the regulator said this figure was “fewer than expected” but put it down to a number of factors. 

The regulator said lenders did not have the risk appetite to provide finance to mortgage prisoners as its review found just five currently provided options for such borrowers. Therefore, it said the impact of the rule change had been “limited”. 

Some lenders were also unable to offer options to mortgage prisoners due to the pandemic. 

Additionally, most of the borrowers who applied for a remortgage had borrower and loan characteristics that did not meet lenders’ credit risk appetites.  

The regulator also noted that consumers did not always engage with attempts to switch. 

For example, it found that The Money and Pensions Service, now known as MoneyHelper, had sent out 140,000 letters regarding potential switching options. In response, it only received 534 calls between December 2020 and September 2021. Some 70 per cent of these callers did not meet lender criteria.

Mortgage brokers received 702 subsequent calls, some of which would have overlapped with MoneyHelper. Of the calls to brokers, just 66 progressed to a submitted application while 26 resulted in an offer. 

There were nine borrowers who were referred onto debt or later life lending specialists by intermediaries and 46 were signposted to other solutions including debt advice. 

Aside from this, 2,000 borrowers refinanced without using the modified affordability assessment but the FCA said this could also be down to its messaging at the time. 

In 2019, the FCA changed its rules to allow lenders to modify their affordability assessments and make it easier for borrowers to switch. A year later, it changed rules again to state that active lenders did not need to assess borrowers’ affordability if they were refinancing to a lender within the same financial group as long as they met certain criteria. 

Where borrowers would have been able to switch to an active book within the same financial group, the review said “most, but not all” borrowers would have accessed or been able to access new deals.  

The FCA said the review would be used by the industry and government to consider further solutions. It will also continue to monitor lenders to ensure they provide borrowers both on active and inactive books with support. 


Mortgages on inactive books fall

Overall, the number of mortgages on closed inactive lender books has dropped to 195,000 from 250,000 which the FCA said represented 2.3 per cent of all residential mortgages. 

The FCA defines a mortgage prisoner as a borrower who is up to date with their payments and is unable to switch to a new mortgage deal even though they could benefit from doing so. 

Within the 195,000 figure, 77,000 are unable to switch while 30,000 are unlikely to benefit from doing so. Therefore, it deems 47,000 of these account holders to be mortgage prisoners. 


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