Interest-only  

FCA asks for new mortgage powers

FCA asks for new mortgage powers

The Financial Conduct Authority may ask for more power to tackle the issue of mortgage prisoners.

In a speech to the UK Finance annual mortgage conference today (November 6), Christopher Woolard, the regulator's executive director for strategy and competition, said the regulator had the answer to the problem of mortgage prisoners for authorised firms, such as providing lenders with greater flexibility on affordability.

But he said the issue was harder to resolve when it came to unauthorised firms.

Mr Woolard said: "I want to see an answer in the unauthorised space. If need be we will also discuss with government whether a change in our regulatory perimeter or any other government support is needed to protect those customers where mortgages are transferred to the unregulated sector.

"It simply isn't an acceptable argument to hide behind the intricacies of our regulatory perimeter when real families are involved."

The FCA has identified about 20,000 customers in the closed books of authorised lenders and a further 120,000 customers whose mortgages were held by firms that were not authorised and who may be able to benefit from switching.

Mr Woolard said: "We have put the challenge to industry to help these consumers and are leading an industry working group to deliver on that as a matter of urgency."

Earlier this year 59 authorised lenders agreed common standards to help borrowers who took out a mortgage before the financial crisis but were now blocked from switching to better rates despite keeping up with their repayments.

Mr Woolard said this voluntary arrangement was an "important step forward" and said around 10,000 customers could benefit from this.

David Hollingworth, associate director of L&C, said: "To find a solution to the issue of mortgage prisoners you have got to examine all options. It is not an easy nut to crack.

"In the past there was a feeling that if you are switching someone from a higher rate to a lower rate and they can demonstrate they were meeting payments at a higher rate then that should be fed into the affordability test but most lenders have looked at the Mortgage Credit Directive and think they have to do their own assessment."

Mr Woolard also expressed concern about the growth of lifetime mortgages and the potential for lenders to loosen their criteria as the market heats up.

FCA data showed lifetime mortgage sales growing both in number and value, and as a proportion of total mortgage sales.

Over the last five years sales have nearly doubled and in the first half of this year alone the FCA registered nearly 20,000 sales – around the same as the total figure for 2013.

Mr Woolard said these were concentrated around borrowers aged about 70 but the FCA was seeing a gradual upwards trend in the younger 56 to 60-years-old group, who now represented 7 per cent of all lifetime mortgage sales.