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Law360, London (October 26, 2020, 3:27 PM GMT ) The Financial Conduct Authority is easing requirements to give home-owners locked into high-interest mortgages more flexibility with their loans, and will also publish guidance intended to soften potential blows to borrowers during the COVID-19 crisis.
The regulator announced a new rule on Friday designed to make it easier for so-called mortgage prisoners to be able to switch to a new deal with a company that is part of the same group as their current lender, a practice known as intra-group switching.
Such borrowers are in closed mortgage books who are unable to switch lenders and are usually stuck in high-interest loans.
"We want to remove a potential regulatory barrier that might lead to these borrowers experiencing financial harm if it unnecessarily restricts them from being able to access the rates offered by another lender in the same group," the FCA said in its policy statement.
The banking supervisor said it is amending its rules on responsible lending so that mortgage companies can opt not to carry out a standard affordability assessment for borrowers trapped in closed books, a rule that took effect on Friday.
The FCA discussed plans to help mortgage prisoners in March 2019, including by introducing a "modified" mortgage assessment for borrowers. Existing rules say lenders should conduct an affordability assessment before they offer a new mortgage deal to such customers from another provider.
But the new measure may not come into effect as quickly as is hoped, as lenders find their ability to implement changes to rules could be hampered by the pandemic.
The FCA said on Friday that the coronavirus means that lenders "have reported that they will be unable to offer a range of switching options or have processes and systems in place to support remortgaging under our amended rules as quickly as originally anticipated."
The City regulator also said it will issue guidance that will come into force on Oct. 31 stating that lenders should allow borrowers to delay repayments on interest-only and part-and-part mortgages up to October next year. Part-and-part mortgages are partly capital repayment and part interest-only.
The measure will apply to borrowers who continue to make interest payments and are up-to-date with repayments, the FCA said.
Lawmakers have called on the FCA to clarify the scope of its powers to help mortgage prisoners.
--Additional reporting by Joanne Faulkner and Martin Croucher. Editing by Ed Harris.
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