Linda Woodall, director of mortgages and consumer lending at the Financial Conduct Authority, has restated concerns at the regulator over “disappointing” disregard of transitional mortgage market rules by lenders, which is leaving customers facing large fees to downsize their loan.
Speaking at the Council of Mortgage Lenders annual conference today (5 November), Ms Woodall said: “...[L]enders themselves told us that they wanted the flexibility to be able to help these borrowers and to minimise the impact of the new rules, so its disappointing to hear... some lenders are not applying the transitional provisions in the way that we’d expected.
“Instead some firms are applying strict affordability tests when the rules don’t require them to do so and this results in existing customers who are not looking to increase their debt being unable to switch to a new deal.
“We’ve seen numerous examples of this, customers who have been refused a switch to a product with a lower monthly payment on the grounds that a new loan is not affordable, despite the fact they are already managing to make a higher monthly payment.”
Ms Woodall is the latest in a stream of senior FCA figures to highlight the issue, which has also been raised consistently in the national press and in FTAdviser since before the rules were implemented in April, when banks admitted they were going beyond the tests required.
Under the transitional rules, anyone moving their mortgage under existing terms or otherwise downsizing their borrowing, does not need to be reassessed under tougher affordability tests brought in under MMR.
However, many banks are treating such customers as new business despite this exemption, and where borrowers fail they face being trapped into higher rates or paying sizable exit fees, simply to move to loans that are in practice more affordable.
During an FTAdviser live debate on the MMR, Lynda Blackwell raised the spectre of FCA enforcement over the practice, saying that while that ultimately it was up to each lender to set their criteria, but that every firm has a “responsibility to treat customers fairly”.
Until now, the FCA has said it is monitoring the issue and Ms Woodall gave no indication it is yet minded to intervene more formally.
ruth.gillbe@ft.com, ashley.wassall@ft.com
