Brokers have hit out at the FCA’s claim the Mortgage Market Review has not created “mortgage prisoners” locked out of certain parts of the market.
Earlier this week the regulator published two papers on whether the mortgage market was working effectively.
The first was the findings of its responsible lending review post-MMR, while the second was a feedback statement on its call for input on mortgage market competition.
In the responsible lending paper, the FCA says: “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.”
The regulator says the majority of lenders are waiving affordability assessments where applicable to prevent borrowers being trapped on existing deals.
It adds: “If a case is declined, this is often reassessed by an under-writer, and this could result in the decision being overturned. In a limited number of cases we saw customers had to appeal before the application was reassessed by an underwriter.”
But brokers have disputed the FCA’s findings. Association of Mortgage Intermediaries chief executive Robert Sinclair says: “It is great news the FCA has found the mortgage market is now lending responsibly and 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.”
Last week MoneySavingExpert founder Martin Lewis met with Chancellor George Osborne to push him to take action to help mortgage prisoners. Osborne has since written to lenders saying it is “vital” borrowers are able to move cheaper deals.
John Charcol senior technical manager Ray Boulger says: “This is all about perception and reality. It’s all very well for the FCA to say ‘our rules are not stopping lenders doing things we think are sensible’, but actually they are because lenders are worried there will be retrospective action taken against them.
“Lenders have been hit in the past with what they consider retrospective action, such as claims for payment protection insurance, so clearly that does influence their thinking.”
London & Country associate director of communications David Hollingworth says it is clearly going to be harder for people who have taken out mortgages before criteria tightened to negotiate new deals.
He says: “We’ll only really know how many people are struggling and the true extent of the problem once rates rise. By that stage it’s potentially too late so there needs to be more consideration about who exactly is finding life difficult.”
The FCA’s mortgage market findings
On responsible lending:
- Where lending is affordable, there is no evidence rules have prevented firms lending responsibly across particular groups, for example, older borrowers and the self-employed
- Most lenders are using the flexibility afforded by FCA rules when dealing with their own existing mortgage customers. However, some firms could be more proactive and consistent when making use of exceptions.
- Consumers face challenges in making effective choices, particularly when it comes to assessing and acting on information about mortgage products
- Commercial relationships between different players in the sector’s supply chain – in particular the use of panels – might give rise to competition concerns.