A change of rules aimed at helping lower the housing costs of thousands of so-called "mortgage prisoners" has been proposed by the City watchdog. Some 150,000 homeowners are stuck on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal.
The Financial Conduct Authority has proposed loosening its affordability checks for such customers. This could allow these people to switch to deals that are easier to pay. At present, they are stuck on high default rates, owing to an FCA requirement, introduced in 2014, for mortgage holders to meet strict affordability criteria when they apply for a new fixed deal. The planned changes would apply only to those in this situation who are not seeking to borrow more on their mortgage, but just want to get the cost down.
Banks and building societies would still need to agree to take on these customers. But these changes should make it easier for customers to get a more affordable mortgage.
However, Citizens Advice chief executive Gillian Guy said the FCA needed to do more research to find out why customers who were paying high rates weren't switching mortgage provider. While the FCA drags its feet loyal mortgage customers are being penalised a staggering £1.4m every day. The FCA must now go much further to protect these customers from paying the loyalty penalty. We want to see concrete action by the end of the year to stop loyal customers being taken advantage of.