FCA pledges solution for mortgage prisoners

FCA pledges solution for mortgage prisoners

The Financial Conduct Authority (FCA) has confirmed its concern for mortgage prisoners in the UK, and said it is committed to finding a solution for those affected.

In a letter to the Treasury select committee in July, released this week, the FCA's chief executive Andrew Bailey said the regulator had opened dialogue with active lenders and their trade bodies to secure a solution to the problem, which could involve an internal switch agreement.

He acknowledged finding a solution to help customers who hold mortgages with firms that are no longer active would be more challenging but said the regulator was keen to help both groups.

Addressed to chairwoman Nicky Morgan, the letter identified 30,000 people that are deemed mortgage prisoners by the FCA.

Mr Bailey wrote: "We are focused on finding solutions for mortgage prisoners who have pre-crisis mortgages, and those who have met their repayment obligations.

"We have begun discussions with relevant firms, consumer groups and government looking at possible solutions to this problem, including what would make these customers more attractive to active lenders."

The correspondence follows an FCA hearing in June, at which the regulator faced questions from the committee on the status of consumers unable to switch mortgages, despite being up to date with payments, who find themselves on reversion rates post the financial crisis - often identified as "mortgage prisoners".

Of the 30,000 consumers the FCA believes would benefit from switching products but may be unable to do so, 10,000 hold mortgages with ‘active’ lenders that continue to lend to new or existing customers.

At the end of July, a cross-industry voluntary initiative between trade bodies UK Finance, the Building Societies Association and the Intermediary Mortgage Lenders Association saw 59 authorised lenders agree common standards to help those borrowers trapped on pre-crisis mortgages.