FCA chief executive Martin Wheatley says he is disappointed at the way lenders have responded to the mortgage market review.
The Daily Mail reported last week that although Wheatley agrees it is reasonable for lenders to decide what level of risk they are prepared to take, some have gone too far.
Wheatley (pictured) said: “It shows some lenders are not approaching the rules in the spirit they were intended.
“Every firm has a responsibility to treat their customers fairly and we would expect them to put good customer outcomes at the heart of everything they do. Leaving customers on higher rate deals does not fit with either of those criteria.”
Lenders have been criticised for not using transitional rules that waive the new affordability checks for existing borrowers who wish to switch to a lower rate mortgage.
Start Financial Services manager Tom Cleary says: “To a degree it is understandable that lenders have been a bit overzealous in their interpretations.
“That will loosen up but if the FCA thinks lenders have not captured the spirit of MMR, it should have been clearer about exactly what lenders were expected to do.”