The Financial Conduct Authority’s (FCA) proposals to extend the maturing period for interest-only mortgages until 2021 and to ease inter-group switching were a relief but will not help many mortgage prisoners, the UK Mortgage Prisoners group has said.
Last week, the regulator launched a consultation paper which said it was considering delaying capital repayments for interest-only borrowers until 31 October 2021 if needed.
It is also proposing to would make it easier for lenders to offer switching options to consumers who are in a closed book within the same financial group as the lender, by allowing them not to undertake a standard affordability assessment when doing so.
UK Mortgage Prisoners said as these were not compulsory for lenders it would not help those who have no repayment vehicle or those who have been affected by high interest rates.
The group said conflating inactive lenders with unregulated ones was problematic as it obscured the harm faced by those who had mortgages with lenders who were outside regulatory perimeters and able to set their own rates.
“This virtue signalling must stop,” UK Mortgage Prisoners added.
“Our members need capped standard variable rates, access to the competitive market, and for their homes to stop being sold to these vulture funds.”
In its response, the All Party Parliamentary Group (APPG) for Mortgage Prisoners said the relief would be temporary and suggested the FCA update its guidance so interest-only customers are offered a full range of deals at the end of their term.
Seema Malhotra MP, co-chair of the APPG on Mortgage Prisoners, said: “The APPG has in the past called for banks to be forced to apply streamlined affordability tests when allowing mortgage prisoners to switch to better deals offered by the same banking group.
“The proposal from the FCA to allow firms to use a streamlined approach when a mortgage prisoner is switching within a larger group is welcome but the only way in which it is going to help mortgage prisoners is to make it compulsory.
“Unfortunately, what is glaringly missing here is any help for the tens of thousands who are caught with vulture funds, and who have no hope of accessing better deals with their existing provider unless the FCA intervenes to cap interest rates.”
Shekina is a reporter at Mortgage Solutions. She has over two years experience in the B2B publishing market, with previous industries including the pet, funeral, hospitality, retail and jewellery trades.
Follow her on Twitter at @ShekinaMS