FCA chief Andrew Bailey has been called on to clarify the implications of unregulated  versus regulated funds for mortgage prisoners.

Campaigning MPs met with Bailey last month to accelerate pressure on the FCA to assist those 170,000 mortgage borrowers trapped on high repayment rates.

UK Mortgage Prisoners lead campaigner Rachel Neale also attended the meeting, which she calls “positive”. However, Neale says that the situation has been “poorly addressed by various bodies” and that having some funds sitting in unregulated companies, whilst those that administrate are regulated “not only causes confusion but allows unfair treatment.”

All-Party Parliamentary Group on Mortgage Prisoners co-chair Seema Malhotra MP has written to Bailey on the matter following the meeting, saying: “Regulation and the regulatory perimeter is clearly a very complex area. We are often told that whilst a fund may be unregulated, the administrator of that fund is regulated, and therefore has the same obligations to its customers.

“However, it is clear from our discussions regarding both commercial and mortgage lending, this is not the case.”

Malhotra asks Bailey to set out the key differences and practical implications for customers held by a ‘normal regulated lender and an unregulated fund.’

In her letter she adds: “You also stated that the powers that the FCA currently has are insufficient to deal with unregulated funds, even when they are administered by a regulated entity,” and requests clarification on this, saying that funds administered by a regulated entity “obfuscates and confuses the true nature of the relations.”

In January, the FCA found that over half of mortgage prisoners who would be eligible to switch to a new product using new rules published in late October last year are paying an interest rate of 3.5 per cent or lower.

An estimated 35 per cent were paying less than 3 per cent with the FCA saying that these borrowers would struggle to find a cheaper deal for the remainder of their mortgage term.