Announcing the start of the review earlier this month, the FCA said its previous assumptions “resulted in a low estimate” of the number of people who have mortgages with inactive companies who cannot switch despite being up-to-date with payments are. Current figures suggest that there are around 250,000 mortgage detainees in the UK.
Therefore, as part of its review, the FCA will “re-examine” its assumptions, including its criteria of whether a person can move. She adds that these updated assumptions, along with more recent data and a change in economic conditions, “are likely to lead to an increase in the economy [the] estimated number of mortgage prisoners “.
MoneySavingExpert.com (MSE) and its founder Martin Lewis have been advocating more help for those unable to reschedule for years. Earlier this year, Chancellor Rishi Sunak agreed in an interview with Martin that it was necessary “to make sure we have workable solutions” to help all mortgage prisoners, while Treasury Secretary John Glen announced that the government would work with the FCA to make existing ones Check data on mortgage prisoners.
Recent rule changes for mortgage prisoners are also being reviewed
As part of the review, the FCA will also assess the impact of their new, less stringent affordability rules that went into effect for some mortgage detainees last year. She will review how the companies have implemented the rules and whether she believes that there are still barriers to switching for borrowers who have mortgages with inactive lenders.
The review is expected to last until October and the result will be presented to Parliament at the end of November.
It comes after MPs rejected a proposed amendment to the Financial Services Act in April to cap interest rates on certain mortgage detainees.
Mortgage prisoners cannot switch to a cheaper mortgage
Mortgage prisoners are borrowers who were wrongly left behind after the 2008 financial crash – some have home loans with inactive lenders or unregulated companies not offering new mortgages, while others are unable to switch due to the stringent new mortgage sustainability criteria that have been put in place as a result of the Crisis. For example, one borrower we spoke to last year paid 4.59% interest and paid £ 10,000 more than he needed.
For years MSE and Martin – as well as others like the UK Mortgage Prisoners (UKMP) Group – have been calling for help to mortgage prisoners, telling politicians and regulators that people who make ongoing repayments but at a lower rate have been foolishly rejected and said ” You can’t afford a cheaper offer “. For more information, see our complete guide to the Mortgage Prisoner.