FCA 'not brave enough' to tackle mortgage prisoners

FCA 'not brave enough' to tackle mortgage prisoners

The Financial Conduct Authority is "not brave enough" to help mortgage prisoners effectively, a trade body chief executive has said.

Robert Sinclair (pictured), chief executive of the Association of Mortgage Intermediaries, criticised the FCA's decision to overhaul affordability rules for taking too long to come into play, when a discrete "industry agreement" could have solved the problem "more quickly and easily".

Speaking at the Westminster Business Forum today (July 10), Mr Sinclair said initial talks about mortgage prisoners had leaned towards having a "hot house" response, where a group of lenders willing to take on mortgage prisoners would have worked with a select number of brokers to help such consumers switch deals.

But instead the regulator opted to change its responsible lending rules and guidance to allow lenders to offer a modified affordability assessment for borrowers trapped by their mortgage.

Mortgage prisoners are predominantly borrowers who took out a mortgage before the financial crisis but are now blocked from switching to better rates due to changes in lending practices.

Many are told they "cannot afford" a new deal despite the monthly payments being cheaper than their current mortgage policy.

Under the FCA's proposals, published in March, lenders no longer have to abide by certain affordability rules, such as to verify the consumer’s income, but they must not enter into a new regulated mortgage contract unless the borrower can demonstrate that the new mortgage is more affordable than their present one.

Andrew Bailey, chief executive of the FCA, had said he hoped the changes would be in force by the end of the year but he admitted this was "at the mercy of Brexit".

According to Mr Sinclair, going through this process will "slow the mortgage prisoner problem down considerably".

Mr Sinclair said: "There is a way to facilitate all of this, but the regulator doesn’t think in simple consumer lines.

"The FCA is petrified of stepping outside the box and ending up in court. It’s more frightened of their shadow than the consumers they are meant to help."

The AMI chief said he understood the FCA’s predicament over the issue and noted that problems of anti-competitive rules could be raised, but he thought it "still could have been done", it just "required a degree of bravery".

He said: "I understand why the FCA questioned it, I don’t think we’ve got the right answer."

Morgan Wild, policy lead at Citizens Advice Bureau, said he "completely agreed" the regulator had not done enough, but stressed the FCA’s own shadow "could be quite frightening".

He said: "There is a massive fear of regulators being taken to court, and that has a chilling effect on pro-consumer enforcement and action that could take to address some problems."

The FCA has been approached for comment.