1 May, 2020 Open access
1 May, 2020 Open access
Extension of deadline due to 'significant changes' in the mortgage market since the outbreak of coronavirus, which mean that that it would be wrong to require letters to be sent to people at this time
The Financial Conduct Authority (FCA) has extended the period during which lenders are required to contact 'mortgage prisoners' (people who were unable to switch to a more affordable mortgage) to let them know that they may now able to switch following changes to the responsible lending rules and guidance made in October 2019.
NB - the new rules allow lenders to use a different and more proportionate affordability assessment for people who meet certain criteria, such as being up-to-date with payments under their existing mortgage and not looking to move house, or borrow more (except to finance certain fees), and require lenders and mortgage administrators to notify certain categories of customers of the possibility that they may be able to switch.
However, in a statement today, the FCA highlights that -
'As a result of [coronavirus (COVID-19)], and particularly due to the difficulty in establishing property values and the government’s advice to delay house moves where possible, we have seen significant changes to the mortgage market.
Lenders have removed a large number of products from the market for all consumers since the beginning of March. Lenders have also faced challenges serving existing customers and have granted 1.6m payment holidays. Realistically, the current economic conditions mean that lenders are not yet in a position to offer new options for borrowers.'
The FCA goes on to say that, while its rules require firms to write to those who may be eligible to let them know they may be able switch their mortgage, the lack of switching options available means that that it would be wrong to require letters to be sent to consumers at this time, and that, as a result, it is extending the window during which it expects firms to contact consumers about switching options by three months to 1 December 2020.
NB - in addition, the FCA says that -
'We also recognise that this is an uncertain and difficult time for many mortgage borrowers, and particularly for mortgage prisoners. As a result, today we have written to some firms to reiterate that customers on variable rate mortgages taken out before the financial crisis with higher risk characteristics must be treated fairly, and that lenders should be actively reviewing their rates.'
The FCA statement on mortgage prisoners is available from fca.org.uk