The UKMP welcomes the FCA’s further actions to help the mortgage prisoner situation but feels that the detriment that is caused on consumers trapped with inactive lenders, unregulated entities and vulture funds is still not fully realised. The mortgage prisoners are being overcharged by between 2.4% and 3.5%. This is in some instances up to 8 times the detriment the FCA identifies when it states the mortgage prisoners were only being overcharged by 0.4% a year.
The UKMP have given the FCA a number of cases of mortgage prisoners as well as mortgage prisoners contacting the FCA directly so feel that in this consultation paper using real case studies would have been more appropriate in showing the real impact and misery caused by these firms and where the lack of fair treatment has been continued to be allowed and the consumer has little or no protection from.
The FCA has proposed that the use of the streamlined affordability test when mortgage prisoners are trying to switch to a different lender within the same banking group as a voluntary measure. UKMP feel this should be made compulsory for the lenders to use. By not forcing this onto the lenders will just give them the opportunity as time has shown to simply continue to fail to help the mortgage prisoners.
For years, the large banks and building societies who hold the separate subsidiaries or closed books have shown little willingness to offer better deals but have continued to exploit them. By the FCA choosing to make this a ‘voluntary’ action UKMP does not feel it pushes the lenders to change their ways but rather continue to exploit mortgage prisoners and continue causing the misery for thousands of homeowners.
12 months ago, the new modified affordability test was introduced which brought great hope for the mortgage prisoners. Since then not one mortgage prisoner has been able to switch to a better deal using the new criteria. That is another 12 excruciating high mortgage payments, these consumers cannot be made to wait any longer. UKMP want an investigation into the levels of interest rates being charged and for a cap to be introduced to prevent further exploitation. The FCA needs to work urgently on this to protect all mortgage prisoners and for those who are unable to switch.
The UKMP recommends that not only does the guidance restricting repossessions on interest only and part and part mortgages applies to mortgages prior to 20th March 2020 but to ALL mortgages that have matured prior to the date. It excludes those customers from protection when in most cases they also have been seen paying their monthly payments. These homeowners who are facing repossession should not be prevented from benefitting from the guidelines because it happened before 20th March 2020.
Again UKMP feel that by the FCA requiring the lenders to only consider options for the interest only customers it gives little support and fair treatment when the consumer is offered a choice of full repayment of capital or face losing their family home through repossession. We feel that time should be given to work through a list of options and strategies to be fairly considered by the lender with the repossession being the very last option after every other action has been investigated.

 

The full response can be viewed below

 

Response to FCA CP20 13 from UK Mortgage Prisoners