The FCA has called on lenders to amend their borrower criteria to assist more mortgage prisoners who are close to their risk appetite.

The regulator published it’s mortgage prisoner review today, commissioned by the government.

The report sets out the loan and borrower characteristics of the wider population of 195,000 mortgages in closed books with inactive firms.

It estimates that 66,000 of these borrowers may be able to switch mortgage product with the help of a mortgage adviser or community organisation. The FCA (Financial Conduct Authority) has published case studies on how advice has helped.

Additionally there are 30,000 mortgage borrowers who are unlikely to benefit from switching. They are up to date with payments but can’t switch because of their loan and/or borrower characteristics. However, the interest rate they’re on means they would be unlikely to save money from switching- so they aren’t mortgage prisoners.

The FCA has determined that there are currently 47,000 mortgage prisoners – those borrowers who are up to date with payments and cannot switch when it might benefit them to do so because they have loan and/or borrower characteristics that are outside current lender appetite.

Of the remaining borrowers with mortgages in closed books, 34,000 are in payment shortfall, and 18,000 are near term. These borrowers wouldn’t be able to switch to a new deal, even if they were with an active lender.

The regulator says it has reviewed the effectiveness of its regulatory interventions to remove these barriers to switching. However, it says demand from borrowers and supply from lenders has been low. A small number of borrowers have been able to switch from an inactive lender to a new deal with an active lender.

“We hope that more mortgage prisoners will be able to switch their mortgage. We encourage lenders to consider if they can amend their lending criteria to lend to mortgage prisoners who are close to their risk appetite,” says an FCA spokesperson,

“We are publishing data so lenders can consider whether they can adapt their lending criteria (or use the flexibility in our rules) to lend to these borrowers.”

The review says other mortgage prisoners who continue to lie outside the risk appetite of lenders may be able to take steps, with the help of consumer organisations or a debt advice charity, to improve their chances of switching to a better deal in the longer term.

The government and industry will use this review to consider if there are further practical and proportionate solutions for mortgage prisoners. The FCA says it will continue to support them to do this and will focus on those areas in the market where it identifies the greatest harm which could affect mortgage prisoners and other borrowers.

In particular, ensuring firms provide all mortgage borrowers (in both closed and active books) with the support they need when they get into financial difficulty; carrying out work to further understand the issues facing borrowers (in both closed and active books) who have interest only or part repayment mortgages; supervising and enforcing FCA guidance for firms on the fair treatment of vulnerable customers to help ensure fair outcomes for customers with characteristics of vulnerability.