AMI: lenders are working with customers “they like” but brokers are seeing those who continue to struggle to remortgage – despite transitional arrangements.
Up to one million mortgage prisoners are being neglected by the Financial Conduct Authority and lenders because they do not fall within the remit of the regulator’s review of responsible lending, it has been claimed.
Robert Sinclair, chief executive of the Association of mortgage Intermediaries, said lenders are working with customers “they like” but brokers are seeing those who continue to struggle to remortgage – despite transitional arrangements.
Based on evidence from AMI members, he believes there are up to one million of these borrowers.
He said: “AMI considers that there remain underserved groups of borrowers in the areas of, interest-only, lending into retirement, self-employed, contract workers, foreign currency earners and ex-pats that still need attention if the market is to serve the whole.”
The FCA published its Responsible Lending Review into mortgage lending decisions and the Feedback Statement following the October 2015 Call for Inputs on competition in the mortgage sector today.
However FCA director of competition Deborah Jones admitted in an interview today that the work done to date by the regulator considered only those borrowers who have been approved for remortgage – not those who had been rejected.
She said: “The scope of this review considers whether the rules are working well for consumers so we have looked at where the rules have been used.
“We are conducting a market study later this year and plan to consider whether customers are getting good outcomes as a result of those rules.”
She admitted that the regulator “hadn’t looked at whether trapped borrowers exist or don’t – we are just looking at the rules and their flexibility”.
It follows a separate report published on Friday last week by the Public Accounts Committee which said the regulator has become overly focused on checking financial services firms adhere to detailed rules and is neglecting its duty to check customers understand the products they are buying.
That report said research by the National Audit Office found that the FCA emphasises ensuring that firms “adhere to detailed rules, rather than ensuring that firms do enough to check that customers fully understand the products they buy”.
The FCA’s review into responsible lending suggested that “most lenders are using the flexibility afforded by our rules when dealing with their existing mortgage customers who want to make changes to their loan”.
The review paper said: “However, we are encouraging some firms to improve their decision-making process for these customers, because where firms are prepared to use flexibility in our rules, they are not always doing so early in the process.
“In particular, some firms could be more proactive and consistent in using exceptions to the responsible lending requirements for existing customers.
“Whether or not firms choose to apply the exceptions, firms should consider the fair treatment of customers when they want to make a change to their mortgage.
“In doing so, firms should ensure that customers do not face unreasonable barriers to changing product.”
The FCA said it did not find evidence that the rules have prevented firms lending responsibly across particular groups, for example older borrowers and the self-employed except in one niche area of lending that it had taken steps to address.
It said it had come to this view based on: market data which shows there has been no obvious decline in lending to these customer groups post-MMR; and evidence from its review showing compliant lending to these groups.
Sinclair was sceptical.
He said: “This appears at odds with broker experience and that of the renowned consumer champion Martin Lewis, so no doubt the Chancellor will be assured by the FCA there will be no issues when interest rates rise.”
He said AMI will “of course” work with the FCA to ensure that consumers can have access to effective online tools to educate and enhance their access to the widest market.
