Despite broker claims, the FCA says the Mortgage Market Review has not locked out borrowers from certain parts of the market.
Yesterday the regulator published two papers: a feedback statement on its call for input on competition in the market and the findings of its responsible lending review post-MMR.
In the responsible lending paper, it said: “We do not find evidence that the rules have prevented firms lending responsibly across particular groups, for example older borrowers and the self-employed except in one niche area of lending [lifetime mortgage where regular payments are made and then switches to roll up] which we have taken steps to address.”
When the MMR was introduced, in April 2014, the regulator allowed lenders to waive an affordability assessment to stop borrowers being trapped on their existing deals. But the assessment can only be waived as long as the customer does not wish to borrow more money, there is no “material impact” on affordability and they have a good payment history.
The MMR allowed lenders to apply the rules to their own customers and customers coming from rivals. However, the Mortgage Credit Directive, which came into effect in March, dictates that lenders must apply an affordability test on borrowers who switch over from a rival, although borrowers staying with the same lender are not affected.
In the responsible lending paper, the FCA said: “Our review found the majority of lenders are using the flexibility afforded by our rules when dealing with their own borrowers who wish to make changes to their mortgage contract. Including, for example, those customers wishing to move to a lower cost contract.”
It said that some lenders apply a full affordability test even though they are not required to.
But it added: “However, if a case is declined, this is often reassessed by an underwriter, and this could result in the decision being overturned. In a limited number of cases we saw that customers had to appeal before the application was reassessed by an underwriter.”
The claim comes less than a week after MoneySavingExpert founder Martin Lewis met with the Chancellor to push him to take action to help mortgage prisoners.
Association of Mortgage Intermediaries chief executive Robert Sinclair hit out at the FCA’s findings.
He says: “It is great news that the FCA has found that the mortgage market is now lending responsibly and that there are no issues with mortgage prisoners. This appears at odds with broker experience and that of the renowned consumer champion Martin Lewis, so no doubt the Chancellor will be assured by the FCA there will be no issues when interest rates rise.
“AMI considers that there remain underserved groups of borrowers in the areas of interest-only, lending into retirement, self-employed, contract workers, foreign currency earners and expats that still need attention if the market is to serve the whole.”
Sinclair added that he was disappointed the FCA felt it necessary to conduct a full-blown market study on competition instead of opting for thematic work and supervisory action.
He said: “Some might applaud the FCA decision to challenge the results of its own MMR, but AMI is concerned that this will only introduce uncertainty into what is still a fragile market.”