The Financial Conduct Authority has relaxed lenders affordability rules to help mortgage prisoners stuck on expensive deals. The changes will only apply to a small section of all mortgage prisoners however as they must be up to date in payments and fees for the last 12 months, as well as staying in their current property and not looking to increase their borrowing.
The FCA believes that up to 14,000 people could benefit by switching to a cheaper deal under these new rules, as previously only a borrowers existing lender could relax the affordability criteria a borrower must meet. It is estimated that there are still over 100,000 mortgage prisoners in the UK that will not be eligible under the new rules and there are calls on the government to do more to help mortgage prisoners.
Martin Lewis, founder of MoneySavingExpert.com said this “More must be done for the 100,000+ of others who are stuck in this financial trap. Our own research shows that everyday mortgage prisoners are pushed closer to their financial and mental limits”.
Borrowers who took out mortgages pre-financial crisis could have obtained loans that were simply too big for them to manage, In some cases borrowing up to 125% of their income. After the crisis, regulations were implemented that tightened lending policy leaving those borrowers stuck on expensive rates with no options to move to a better rate or a different lender.
The FCA also asked the government to extend their powers to better equip them to help mortgage prisoners, currently they have severely limited powers over unregulated lenders and the mortgage contracts they hold.
In a statement the FCA said, “Decisions about our regulatory remit are a matter for the government and parliament. In our view, there is a case for extending the regulatory perimeter to capture all mortgage loans.”
The FCA argue they could better challenge lenders that don’t keep their variable rates fair to customers and would allow them to better influence the marketplace if there powers were extended to all mortgages, they did however concede that they would need to reassess the rules they follow if they had a wider remit.
The debate goes on regarding the apparent lack of support from our government for people stuck in expensive mortgage deals, but there at least hope for thousands of mortgage prisoners who could save hundreds of pounds a month by switching to a new lender.