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Responding to the FCA's policy statement on changes to mortgage responsible lending rules and guidance, Director of Mortgages at UK Finance Jackie Bennett commented:
"The regulated mortgage industry supports all measures to help creditworthy borrowers on reversion rates switch to a better deal, and has already implemented a voluntary agreement that led to 26,000 customers of active lenders being offered a new deal in 2018. ?We look forward to the FCA publishing up-to-date information on borrowers with inactive firms, allowing the industry to develop products that meet these customers' needs where individual active lenders have the commercial and risk appetite to do so. ?However, there is a risk that the regulator's changes could unduly raise expectations among some customers on reversion rates who must now be contacted but may find they are unable to secure a new mortgage. In particular, this may include customers of inactive firms who are in negative equity, in current or recent arrears or on an interest-only mortgage with no repayment strategy. ?We will continue to work with the FCA's implementation group as these changes are rolled out, and also urge the government to consider what more could be done to help customers of inactive firms who are unlikely to benefit from the new rules.?
"The regulated mortgage industry supports all measures to help creditworthy borrowers on reversion rates switch to a better deal, and has already implemented a voluntary agreement that led to 26,000 customers of active lenders being offered a new deal in 2018.
?We look forward to the FCA publishing up-to-date information on borrowers with inactive firms, allowing the industry to develop products that meet these customers' needs where individual active lenders have the commercial and risk appetite to do so.
?However, there is a risk that the regulator's changes could unduly raise expectations among some customers on reversion rates who must now be contacted but may find they are unable to secure a new mortgage. In particular, this may include customers of inactive firms who are in negative equity, in current or recent arrears or on an interest-only mortgage with no repayment strategy.
?We will continue to work with the FCA's implementation group as these changes are rolled out, and also urge the government to consider what more could be done to help customers of inactive firms who are unlikely to benefit from the new rules.?
For more information please call the UK Finance press office on 020 7416 6750 or email press@ukfinance.org.uk
<ol><li> 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.</li> <li> UK Finance?s response to the FCA consultation CP19/14 can be found <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c…; <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.<br /> </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> </ol><ol><li value="6"> 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> </ol><ol><li value="9"> UK Finance?s latest figures on <a href="https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2F74n5c… product transfers</a> show that 292,500 homeowners switched product with their existing provider in the second quarter of 2019, an increase of 7.3 per cent year-on-year. These figures show that customer engagement remains high and the majority of mortgage customers switch to a new deal shortly after their previous deal expires.</li> </ol>
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