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Responding to the Financial Conduct Authority's data on the mortgage prisoner population, Stephen Jones, CEO, UK Finance, said:
These figures help provide much needed clarity for both customers and lenders confirming that, as per the regulator's previous estimates, around 14,000 eligible customers will likely meet the lending criteria and stand to make a meaningful saving. Given this number of borrowers, there will be a limited number of firms who, dependent on risk appetite, will be able to develop new products to meet their needs. ?As these figures show, there is still a large number of customers of inactive firms who will not be helped by the new rules and the regulator recognises that many of these customers will also currently sit outside its protection. We therefore urge the government to ensure that all customers, regardless of owner, are treated fairly.
These figures help provide much needed clarity for both customers and lenders confirming that, as per the regulator's previous estimates, around 14,000 eligible customers will likely meet the lending criteria and stand to make a meaningful saving. Given this number of borrowers, there will be a limited number of firms who, dependent on risk appetite, will be able to develop new products to meet their needs.
?As these figures show, there is still a large number of customers of inactive firms who will not be helped by the new rules and the regulator recognises that many of these customers will also currently sit outside its protection. We therefore urge the government to ensure that all customers, regardless of owner, are treated fairly.
<p>UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.</p> <p> <strong>Background information:</strong></p> <ol><li> UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA) announced a <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c… commitment</a> in July 2018 to help longstanding borrowers on reversion rates with active lenders switch to a new deal. The industry voluntary arrangement led to 26,000 customers of active lenders being offered a better deal in 2018.</li> <li> UK Finance?s <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c… figures</a> show that the number of interest-only mortgages has fallen by over half (54 per cent) in the past seven years, from 2.5 million in 2012 to 1.23 million in 2018. This follows an industry-wide commitment by regulated mortgage lenders to contact all interest-only borrowers with loans scheduled to mature before the end of 2020, to ensure they are on track to repay their loans or work out an alternative solution.</li> <li> Under the FCA?s new affordability rules, 170,000 borrowers who are up-to-date with payments and eligible to switch must be contacted and provided with details of the options that are available to them.</li> <li> It will be up to each lender to decide whether they want to adopt the new rules, with individual firms making commercial decisions depending on their risk appetite and in line with other regulatory requirements. Given the complex changes that lenders would need to make to their lending policies, underlying systems and staff training, it could take some time before any new products are in place.</li> <li value="5"> Those customers in closed books unlikely to benefit from the new rules include those with: <ol><li> an interest-only mortgage and no repayment strategy;</li> <li> high loan to value (LTV) and negative equity;</li> <li> current or recent arrears;</li> <li> outstanding fees and charges; and/or</li> <li> a low minimum balance/short remaining term.</li> </ol></li> <li> All new customers will need to undergo some income verification for anti-money-laundering purposes.</li> <li> The FCA?s final <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c… Market Study</a> report found that the mortgage market is, on the whole, working well.</li> <li> UK Finance?s latest figures on <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c… product transfers</a> show that 311,400 homeowners switched product with their existing provider (product transfers) in the third quarter of 2019, an increase of 7.5 per cent year-on-year. Of these, 175,900 were on an advised basis and 135,500 were on an execution-only basis.</li> </ol>
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