FCA Urges Lenders to Support UK’s 47,000 ‘Mortgage Prisoners’
The FCA asks banks to offer support to mortgage prisoners.
The FCA has urged banks and construction companies to consider changes in loan criteria to help some 47,000 borrowers who could benefit from a cheaper home loan but are currently unable to move.
A review of “mortgage inmates” by the Financial Conduct Authority found that there were about 195,000 households whose debts had been sold to dormant lenders and that a quarter of them could save money if they were allowed to switch to a new deal.
However, despite changes that have made it easier for banks to offer home loans to these borrowers at a rate better than what they are currently paying, the FCA found that demand from customers and supply from lenders has been low.
“We hope that more mortgage inmates will be able to change their mortgage,” the FCA said. “We encourage lenders to consider whether they can modify their loan criteria to lend to mortgage inmates who are close to their risk appetite.”
The review looked at the position of borrowers whose loans were sold to new lenders after the financial crisis. At the last count, it found that about 250,000 borrowers were affected, but the number has decreased as some borrowers have been able to move out.
Initially, the borrowers were in banks such as Northern Rock and Bradford & Bingley, which failed during the crisis.
Many had taken out interest-only mortgages, some had self-certified their income rather than having to prove it, and some borrowed more than 100% loan-to-value (LTV).
After the crash, they moved to lenders who were not offering new deals, so they weren’t given the same opportunity to move on to lower rates than if they were with an active lender.
The FCA said that about 47% were paying an interest rate between 3% and 5%, compared to 17% of borrowers with active lenders, while 3.3% were required to pay interest at more than 5%, compared to just 0.8% for other borrowers.
HICH LTD has revolutionized the property survey market since day one! Our property survey service is listed as one of the best in the whole of the UK! Take a look at our Trustpilot page and see why everyone chooses us as their property survey provider.
Our vast experience in the local property survey market has made us the number one choice when it comes to surveyors. We offer a top-level service at affordable prices, the cost of our surveys is based on the number of rooms in your property, not their value, so our prices are always better than the competition.
At HICH LTD we are pleased to do our bit to make the world a better place, that’s why we continually partner with NGOs and other institutions to join forces in environmental, social and charitable causes. If you want to know more about our efforts or want to know how you can help, contact us at email@example.com.
Are you looking for a roof, structural, or bespoke survey? Request it here!
Follow us on our social networks to keep up to date with the most relevant property market news, tips for being a responsible homeowner, and much more!