The FCA has welcomed a commitment from three mortgage industry bodies to help borrowers tied to reversion rates switch products.
UK Finance, the Building Societies Association and the Intermediary Mortgage Lenders Association announced the commitment today.
The agreement, which covers 59 authorised lenders representing 93 per cent of the UK residential mortgage market, comes after the FCA identified issues in its Mortgages Market Study interim report.
The report identified a number of borrowers “who are on a reversion rate, are up-to-date with repayments and would benefit from switching to a new deal but cannot do so”.
Under the commitment, if a borrower is a first charge owner-occupier, an existing borrower of an active lender, on a reversion rate, looking for a like-for-like mortgage, is up to date with payments, has a minimum remaining term of two years, has a minimum outstanding loan amount of £10,000, and is able to benefit from switching, they will receive a letter from their lender by the end of this year.
In a statement, the FCA says: “We will work closely with industry to discuss the detail of this arrangement and monitor the impact it will have. We will also continue to work with industry to identify solutions for borrowers who have mortgages with inactive firms and any active lenders not signed up to this agreement.”
UK Finance director of mortgages Jackie Bennett says: “Lenders have responded to the FCA’s challenge and made a voluntary commitment to help these longstanding borrowers, offering them the ability to switch to an alternative product if they meet the agreed standard criteria.”
Bennett says more lenders are expected to participate in the coming months.