The Treasury says it remains “committed to seeking additional options” for the country’s 250,000 mortgages prisoners as the UK regulator publishes the terms of reference for its latest review into this area.
The Financial Conduct Authority said earlier this week it would look at what it had already done to allow greater switching among mortgage prisoners and review what more needed to be done.
Mortgages prisoners are homeowners trapped in expensive mortgage deals, unable to switch to cheaper ones often because they cannot pass stricter affordability tests eventually brought in in the wake of the financial crisis in 2014.
The FCA said it will study the market effect of the modified affordability assessment, introduced in October 2019 and its intra-group switching rule change, introduced last October.
In July 2020, the FCA had said there were around 250,000 mortgage prisoners in the UK, but now suspects that is a “low estimate”.
It says: “We expect that the change in economic conditions, more recent data and updated assumptions are likely to lead to an increase in our estimated number of mortgage prisoners.”
The body plans to put its review before parliament in November.
It says: “We will provide the results to the government, and the economic secretary to the Treasury [John Glen] has committed to use them to establish whether further practical and proportionate solutions can be found for these borrowers.”
The Treasury says following the review, it will work with the industry to “look for practical and proportionate solutions to help as many affected borrowers as possible switch to an active lender”.
It added: “This could include taking advantage of the modified affordability assessment, offering additional flexibility around other aspects of the underwriting process, or other steps to reduce the barriers preventing these borrowers from switching to a better deal.”
The Association of Mortgage Intermediaries is one of the industry groups that has backed the Treasury statement.
Ami chief executive Robert Sinclair says: “Ami continues to work with the FCA, UK Finance, the BSA and lender partners to try to support active lenders who will assist those capable of transferring from closed book asset managers.
“It is encouraging that the economic secretary to the Treasury is taking an active interest in this topic.
“Ami members are strong supporters of the broker list on the Maps website and committed to help in any way they can.
“We will be working with the FCA in the coming months to help identify if more flexibility can be delivered, understand more from their new data analysis and work out if more can be done to encourage those who are prisoners to develop plans to get remortgage ready.”
Other signatories to the Treasury statement are: Barclays Bank, the UK Building Societies Association, HSBC UK, Lloyds Banking Group, the Nationwide Building Society, NatWest Group Santander UK and UK Finance.
