The FCA has signalled it may look to crack down on clauses within mortgage contracts which allow lenders to push through rate hikes despite base rate remaining at a record low.
The Times reports that the FCA has written to bank and building societies as the regulator reveals that several lenders are seeking to follow Bank of Ireland and West Bromwich Building Society in hiking tracker rates.
According to the newspaper, the letter from FCA director of supervision Clive Adamson states: “A number of mortgage lenders have engaged with us recently about changing their mortgage contracts, including standard variable rates.”
Adamson goes on to warn that changes to mortgage terms could breach consumer law and the FCA’s principles for businesses, and that lenders should be able to demonstrate to the regulator they have complied with relevant rules when making any changes.
The FCA plans to publish a discussion paper on the fairness of changes to mortgage contracts next year.
Money Marketing reported earlier this month that more than 150 West Brom borrowers are launching a legal challenge after the mutual told 6,700 of its buy-to-let tracker customers their rates would increase by 2 per cent on 1 December.
Bank of Ireland borrowers are also seeking legal advice after the bank wrote to 13,500 buy-to-let and residential borrowers on tracker mortgages in February saying their rates would be hiked.
Buy-to-let borrowers saw their rate jump from Bank of England base rate plus 1.75 per cent to base plus 4.49 per cent, while residential borrowers saw their rate rise from base plus 1.75 per cent to base plus 2.49 per cent, then to base plus 3.99 per cent.
The FCA set out concerns following Bank of Ireland’s rate hike in a letter to Treasury select committee chairman Andrew Tyrie. In the letter, published in July, FCA chief executive Martin Wheatley said the regulator has restricted powers in tackling the rate hikes as the mortgages were sold prior to regulation of the sector.
Wheatley said: “I would like to assure you that the FSA was concerned about this issue from a consumer protection perspective and that the FCA continues to work with the firm to ensure appropriate consumer outcomes.”
The letter was written the day before Bank of Ireland reversed its decision for 1,200 customers.