The Association of Mortgage Intermediaries has backed a call for the FSA to reduce the impact of the mortgage market review on so-called “mortgage prisoners”.
Earlier this week, the Financial Services Consumer Panel called for the FSA to implement a new rule to protect borrowers who are left unable to exit their current mortgage due to factors such as high loan-to-value, negative equity or a tightening of criteria in the interest-only market.
The problem facing these borrowers has been put in the spotlight recently after Halifax, Co-operative Bank, Bank of Ireland, and Clydesdale and Yorkshire Banks increased their SVRs.
Ami is calling for the FSA to allow a degree of flexibility to allow lenders to move customers onto a new deal and suggests a 10 per cent tolerance on both the additional borrowing and the monthly cost of borrowing.
Ami director Robert Sinclair says: “The transitional arrangements introduced in the MMR proposals by the FSA should aim to reduce the impact on consumers who could otherwise become property and/or mortgage prisoners.
“This is particularly the case for those who may have self-certified in the past, have good payment histories and have enjoyed the benefits of interest only loans. It is important that the market continues to allow such existing customers to have some flexibility, without taking on significantly greater financial exposure.”
He adds the scale of the problem facing “mortgage prisoners” will only be exposed when the Bank of England increases base rate.