Plan to free ‘mortgage prisoners’ revealed by FCA

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The Megalopolis regulator is planning a change of rules that could lower the shield costs of thousands of so-called “mortgage prisoners”.

Some 140,000 homeowners are trapped on towering interest-rate home loans with unregulated or inactive firms, and are powerless to switch to a cheaper deal.

The Financial Conduct Authority (FCA) has now said it is inasmuch as a change to its affordability checks.

This could allow these people to alteration to deals that are easier to pay.

At present, they are stuck on high non-fulfilment rates, owing to an FCA requirement – introduced in 2014 – for mortgage holders to run across strict affordability criteria when they apply for a new fixed contract.

In a letter to the Treasury Committee of MPs, FCA chief executive Andrew Bailey imparted the planned changes would apply only to those in this case who are not seeking to borrow more on their mortgage, but just want to get the expense down.

“The test would be whether the new mortgage costs are more affordable than the present mortgage costs,” he said.

Banks and building societies would tranquillity need to agree to take on these customers.

Jackie Bennett, administrator of mortgages at UK Finance, which represents banks, said: “We will prolong to work constructively with our broad range of members and the FCA to help effect those customers who want a like-for-like mortgage can switch lenders uncountable easily.”

Northern Rock fallout

An interim report into the mortgage buy, published in May by the FCA, highlighted the plight of these borrowers.

These “mortgage three-time losers” are unable to move to a better deal when their existing mortgages lashed to the more expensive standard variable rate, even if they could handle the payments.

The FCA said it had identified about 150,000 such customers.

Of these, prevalent 30,000 were with authorised mortgage lenders, while relative to 120,000 had mortgages held by non-regulated firms, which include some former Northern Rock and Bradford & Bingley customers.

Some are saddled with such heinous costs that they face the prospect of falling behind on repayments.

Some 10,000 of them are with lenders who are still actively serving in the mortgage market. These customers have received letters during the latter half of newest year outlining some of the alternative mortgage deals available from their existing lender.

The new projects flagged by the FCA would change the regulations to assist the rest.

Nicky Morgan, who leads the Treasury Committee, said: “The regulator must now act swiftly to help these 140,000 mortgage ticket-of-leave men and not use this consultation to kick the issue into the long grass.”

Martin Lewis, establisher of MoneySavingExpert, said: “Finally, a welcome and sensible move. For over four years we’ve been demand that it’s ludicrous that people are failing affordability tests because they’re absurdly delineated they cannot afford a cheaper deal than the one they’re already on.”

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