Mortgage Prisoners To Be Freed
The Financial Conduct Authority (FCA) has published its Mortgages Market study to try and make the mortgage market more competitive, with even league tables to be published for mortgage brokers.
In addition, the FCA suggests it will ask mortgage lenders to reassess their mortgage affordability underwriting to free up so called ‘mortgage prisoners’.
What is a Mortgage Prisoner?
You may have taken out a mortgage before the Mortgage Market Review (MMR) rules started. Before these rule changes, mortgage lenders could lend based upon your ability to afford the mortgage today with no reference to the future. MMR introduced new rules meaning that mortgage lenders must not only assess mortgage affordability today but also stress tested affordability in the future e.g. Can you still afford the mortgage if interest rates increase? This is now the problem with people who were granted a mortgage a few years, now cannot get a remortgage with the same, let alone another mortgage lender and are trapped in higher, standard variable rates (SVR) – they are literally ‘mortgage prisoners’.
What is the FCA suggesting to help Mortgage Prisoners?
The FCA is suggesting that lenders should adjust their lending criteria to look at long standing borrowers that are up to date with mortgage payments, no arrears or past problems with the mortgage, that would normally not meet current underwriting criteria, to be allowed to remortgage based upon past conduct.