The regulator has offered lenders a three-month extension in which to contact mortgage prisoners about switching to a better deal, as a result of the impact of the coronavirus pandemic on the market.
In an update published on its website on Friday (April 1) the Financial Conduct Authority warned current economic conditions meant lenders were "realistically" not in a position to offer new mortgage options to borrowers.
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 beginning of March, the regulator said it would be wrong to require letters to be sent to mortgage prisoners at this time.
The FCA confirmed it had therefore extended the window in which it expected firms to contact consumers about switching mortgage options by three months to the beginning of December.
The watchdog said: "We do not want mortgage prisoners to receive communications encouraging them to switch, when there are no suitable products available for them.
"We will keep this under review alongside other measures to support mortgage borrowers and are committed to working with industry to see this product development happen as soon as practicable.
"We recognise that our work to remove regulatory barriers to switching will not help all mortgage prisoners and that worsening market conditions will have implications for product solutions."
Last year the FCA consulted on new affordability rules which would allow lenders to carry out a ‘modified affordability assessment’ for mortgage prisoners.
So-called mortgage prisoners are predominately those 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 previously 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.