Table of Contents
- The Financial Conduct Authority and UK Finance partner to help mortgage prisoners out of expensive loans
- UK Finance, FCA and other trade bodies developing a remortgaging eligibility tool to help consumers who might not benefit from the relaxation of affordability rule
- Unaffordable borrowing hurting consumers necessitating remortgaging to cheaper alternatives
Recently the Financial Conduct Authority gave thousands of mortgage prisoners a lifeline after it relaxed rules. The FCA indicated that it was doing away with barriers that prevent mortgage customers from transferring to cheaper alternatives.
Contents
Over 500,000 mortgage prisoners to get the option to remortgage
The financial watchdog has now partnered with UK finance to help several mortgage prisoners get cheaper deals. As a result, UK finance is already finalizing the wording of draft letters to over 500,000 mortgage prisoners. The letters seek to encourage these consumers to trapped inexpensive loans to find cheaper and better alternatives.
Third-party administrators will send the letters to all consumers having a mortgage with a lender no longer offering loans. It will target those who will not be offering mortgages by September next year. The letter will reportedly guide borrowers eligible for a better deal to seek an alternative.
Also Read: New FCA Regulations To Unchain Holders Of Mortgages From High Mortgage Rate Deals
As indicated by the FCA, all lending institutions should have mortgage books irrespective of whether they are regulated or not. They should notify borrowers about the rule change and guide on the possibility of getting a better remortgaging deal elsewhere. As a result, some of the lending firms could have stopped lending or their mortgage book acquired by the unregulated firms.
Equally, UK Finance and the FCA are working together with mortgage trade bodies to develop ways of helping mortgage prisoners. They want to come up with ways of helping consumers who might not benefit from the relaxation of affordability rules.
Introduction of a remortgaging eligibility tool
According to UK Finance’s Sue Rossiter, the trade agency has in place an implementation working party with the FCA. Also, she indicated that they are developing a consumer tool that will help in determining eligibility for a new mortgage.
For instance, if they find that one is ineligible because of arrears, they can be passed to a debt adviser. Alternatively, the consumer can receive additional information to help them in rectifying their situation.
So far, the trade body has met various mortgage prisoner groups. It is also considering having discussions with different consumer organizations to discuss the plans. Rossiter stated that the Building Societies Association has already had talks with consumer campaign organizations. There are plans to launch a consumer-facing mortgage broker database to help in directing consumers towards mortgage advice. Hopefully, its launch will coincide with the introduction of the eligibility tool.
FCA seeking affordable loans
The FCA insists that having responsible lending is very important because unaffordable borrowing is hurting the consumer. Because of expensive lending, there are several borrowers trapped in unaffordable mortgages, thus the need for the rule change.
FCA’s Strategy and Competitions Director Chris Woolard indicated that they are making changes, and they expect lenders to do so immediately. He added that lending firms should institute the change fast so that borrowers can benefit as quickly as possible.
Rebecca White is chief editor at CreditRaters.com. Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.