FCA issues statement on mortgage prisoners and consults on proposals to support consumers

FCA has published a statement on mortgage prisoners which presents further analysis the FCA has done, since the data it published back in January, on borrowers with inactive firms, including mortgage prisoners. The main findings of FCA’s analysis are that of the 250,000 consumers with inactive firms: 

1. Around 125,000 are not able to switch to a new deal. 70,000 of these consumers are in payment shortfall so cannot switch to a new deal and are not eligible for the modified affordability assessment. The remaining 55,000 consumers are up to date with payments but have loan/borrower characteristics that mean they are unlikely to be able to switch as they are outside of lenders’ risk appetites. 
2. Around 125,000 should be able to switch to a new deal with a new lender. 88,000 of these consumers could get a better deal with a new lender but are not switching, while the remaining 37,000 consumers would not benefit from switching. 

The statement also sets out the actions FCA has already taken to help mortgage prisoners and outlines further support for consumers who are struggling, including a new dedicated helpline created with the Money and Pensions Service.

Further, FCA has announced that it is consulting on further action to support some mortgage prisoners with options, and to protect interest-only and partial capital repayment (part-and-part) customers whose mortgages have recently matured or will mature during the next 12 months, given the impact of Covid-19. FCA is proposing to:  

• Make rules that will make it easier for lenders to offer switching options to consumers who are in a closed book within the same financial group as the lender. This would mirror the flexibility that active lenders have, under FCA’s existing rules, when their existing customers wish to switch.
• Issue guidance stating that firms should allow borrowers to delay repayment of the capital at maturity on interest-only and part-and-part mortgages up to 31 October 2021, provided borrowers are up-to-date with payments and they continue to make interest payments

This consultation closes on 8 September 2020.