The Financial Conduct Authority (FCA) has today proposed changes to how lenders assess whether or not a customer can afford a mortgage, in a bid to help mortgage prisoners.

Mortgage prisoners, those who have previously been unable to switch mortgages despite being up-to-date with their mortgage payments, have caused the regulator particular concern and FCA executive director of strategy and competition Christopher Woolard said this “is why we are acting now to help remove potential barriers”.

In the final report of its Mortgages Market Study, the FCA confirmed its earlier findings that the mortgage market is working well in many respects, though it falls short of the regulator’s vision in some specific ways.

The authority said that its consultation on new lending rules forms part of a “package of remedies” designed to help the market improve.

The remedies package includes; seeking to speed up more widespread participation by lenders in innovative tools to help customers identify what mortgage deals they qualify for; a proposal for the Single Financial Guidance Body (SFGB) to extend its existing retirement adviser directory to include mortgage intermediaries; proposals to amend mortgage advice rules; and further, in-depth analysis to understand why customers do not switch.

Woolard added: “The market is working well for many with high levels of customer engagement and competition. The package of remedies we are taking forward will benefit consumers by encouraging innovation and making it easier for them to find the right mortgage.

“These changes should make it easier for consumers to get a more affordable mortgage.”

The regulator has proposed that, for those customers who are up-to-date with their mortgage payments, and seeking to move to a more affordable deal without additional borrowing, active lenders will be able to undertake a more proportionate assessment of whether they can afford the new loan.

“The FCA is particularly concerned about customers of inactive lenders and entities not authorised for mortgage lending as they are unable to move to a new deal with their existing lender. To ensure these customers are made aware of this change, inactive lenders and administrators of entities not authorised for mortgage lending will be required to review their customer books to identify and contact eligible customers,” the authority noted in its statement.

Commenting on the move, Key CEO Will Hale said: “Today’s announcement from the Financial Conduct Authority will come as a relief to the thousands of mortgage prisoners across the UK. While naturally we need to ensure that people can afford their mortgage repayments, common sense is vital and taking a serious look at how we can help people these people – especially those with inactive lenders - to improve their financial situations makes sense.

“However, while the proposed changes to the affordability rules are a positive step forward, it doesn’t replace the need for good quality advice. Managing mortgage repayments are unlikely to be the only issue that these customers face and we need to make sure that they receive the support they need to make the right choices for their circumstances.”

more 2 life CEO Dave Harris added: “It’s great to see the Regulator highlight the plight of ‘mortgage prisoners’ and we are supportive of the high level remedies it is proposing. The lending industry clearly needs to do more, go further than it already has to help consumers make sensible lending decisions that lead to better financial outcomes.”

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