Earlier today, on 20 July 2021, the UK Financial Conduct Authority published its terms of reference setting out the steps it proposes to take in its mortgage prisoner review.
The FCA estimates there are around 250,000 borrowers who have mortgages with ‘inactive firms’ (ie firms which are either not lending to new customers, or are not lenders). The FCA accepts that “[n]ot all of these borrowers are mortgage prisoners”. The FCA says mortgage prisoners are “borrowers who are unable to switch to a new mortgage deal despite being up to date with their mortgage payments and, depending on their loan and borrower risk characteristics, could potentially benefit from switching”.
The FCA intends to review two areas:
– a data review: this will review and update the FCA’s data to consider the demographic and loan characteristics of mortgage prisoners; and
– an interventions review: this will review the effectiveness of the FCA’s recent interventions to remove regulatory barriers to switching (focussing on the modified affordability assessments and the intra-group switching rule change).
The FCA expects to undertake its data review and analysis between July and October 2021. It also expects to engage with interested stakeholders between July and August 2021. The FCA expects to report to HM Treasury by the end of November 2021.