The financial regulator is set to introduce new rules to help mortgage prisoners struggling in the aftermath of the coronavirus pandemic, including delaying the repayment on maturing interest-only mortgages.
In a consultation published today (July 29) the Financial Conduct Authority proposed delaying the outstanding repayment on maturing interest-only or part-to-part mortgages for some borrowers until October 2021.
This measure would apply if borrowers, including mortgage prisoners, were currently up to date with repayments but had been affected by the adverse economic conditions caused by the coronavirus crisis.
The City watchdog also proposed easing the rules for borrowers switching lenders within the same financial group as their current lender, making it easier for consumers in closed mortgage books - those which are closed to new customers - to switch to a new deal.
The new rule would see firms able to treat intra-group switching from a closed book in their group in the same way as internal switching, which the FCA said should not require "significant systems changes".
So-called mortgage prisoners are predominately borrowers who took out a mortgage before the financial crisis but were then blocked from switching due to stricter lending rules, or because their loan was sold to an inactive lender.
Such consumers were often told by lenders they could not afford the new deal under the lending rules, despite the new policy having cheaper monthly payments and the borrower having continually paid off their monthly bill and stayed out of arrears.
Earlier this month the regulator issued a call for brokers who could help mortgage prisoners find a better deal and move to an active lender where possible.
The FCA estimated around 14,000 borrowers should be both likely to meet firms’ commercial lending criteria and stand to make a meaningful saving.
In October last year the FCA removed some of the barriers which had stopped so-called mortgage prisoners from finding a cheaper mortgage deal, requiring lenders to write to borrowers who may be eligible about possibly switching their mortgage.
But as a result of lenders removing a large number of products from the market since the coronavirus pandemic hit at the beginning of March, the regulator has since offered lenders a three month extension to contact consumers.
In May the FCA said it would be wrong to require letters to be sent to mortgage prisoners when suitable products were not necessarily available and confirmed the deadline window had been extended to the beginning of December.
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