Finding solutions for home owners in Britain who find themselves trapped in mortgages as they cannot get a better deal due to increased regulation must be a top priority for the lending industry, according to one of the most senior Government Ministers.
Economic Secretary to the Treasury, John Glen, has written to the Treasury Committee saying that he has instructed officials to work with the Financial Conduct Authority (FCA) and lenders to help borrowers who are stuck.
Under UK regulations lenders can waive affordability requirements for new and existing borrowers who are remortgaging and not increasing the size of their loan, exemptions put in place to help those with large mortgages who may have found it hard to remortgage under new rules.
But the European Union’s mortgage credit directive which came in afterwards meant this could no longer be done when a borrower moves to a new lender, leaving many home owners unable to access the best possible deals and therefore becoming ‘mortgage prisoners’.
In the letter Glen points out that while UK Finance, the Building Societies Association and the Intermediary Mortgage Lenders Association have a voluntary agreement to help mortgage prisoners, there are still many stuck with inactive lenders.
‘I have made clear to my officials that exploring solutions for these customers is a top priority,’ the letter says.
It also points out that home owners who feel that they have been treated unfairly should make a formal complaint to their lender and if the result is not satisfactory they should go on to complain to the Financial Ombudsman Service.
But Jackie Bennett, director of mortgages at UK Finance, pointed out that many mortgage prisoners are with inactive lenders or unregulated owners and cannot switch to a better deal unless legislation is changed.
‘We strongly support the Government’s commitment to explore potential solutions for customers who have mortgages with inactive lenders. The industry has already made a voluntary commitment to help long standing borrowers on reversion rates with active lenders switch to a new deal,’ she said.
‘We will continue working closely with the Government and FCA to look at how active lenders might be able to support these customers. This could include changing the current rules to make it possible for customers who want a like for like mortgage to move between lenders more easily,’ she added.
