The FCA has issued new guidance stating that lenders should allow mortgage prisoners to delay their payments on maturing interest-only mortgages until 2021 due to the ongoing impact of Covid-19. In a statement issued today, the regulator recommends that firms "allow borrowers to delay repayment of the capital at maturity on interest-only and part-and-part mortgages up to 31 October 2021, provided borrowers are up-to-date with payments and they continue to make interest payments". The guidance aims to protect interest-only and partial capital repayment customers whose mortgages have recently matured or will mature during the next 12 months.
The FCA is also proposing new rules that will make it easier for lenders to offer switching options to consumers who are in a closed book within the same financial group as the lender. Earlier this month, The FCA issued a call to mortgage intermediaries who will work with mortgage prisoners to help them identify and move to an active lender where possible, or signpost them to additional support such as debt advice. Its research, published in January 2020, showed that around 170,000 borrowers with mortgages in closed books or owned by unregulated entities were up-to-date with payments and would be eligible to switch mortgages because of its new rules.
These rules allow lenders to assess affordability based on a borrower’s track record of making mortgage payments. The FCA estimates that around 14,000 borrowers should be both likely to meet firms’ commercial lending criteria and stand to make a meaningful saving. Mortgage administrators are required to contact eligible customers by 1st December 2020. Typically, this will involve sending out letters that encourage customers to seek more information from the Money Advice Service provided by the Money and Pensions Service. Customers who may be able to remortgage will then be able to access a list of mortgage intermediaries who will work with them and provide the support that they may need.