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FCA Mortgage Affordability Test Changes Must Happen Quickly

Updated: Jul 2, 2019

The All-Party Parliamentary Group on Mortgage Prisoners has made its submission to the FCA consultation on reforming the mortgage affordability test. Over 100 mortgage prisoners have shared their stories and views with the APPG and these were used to develop our response. We are very grateful to all of them for sharing their stories and for their continued support.


Seema Malhotra MP, Co-Chair of the APPG on mortgage prisoners said: “Mortgage prisoners have told us how frustrating it is to be paying 5% or 6% interest and be told that you cannot “afford” a mortgage which would halve your interest rate and reduce your mortgage payment significantly. The changes to the affordability test should be implemented quickly, be as wide as possible and communicated clearly to all mortgage prisoners.


Even with the changes to the affordability test thousands of mortgage prisoners will still be stuck with their existing lender and be vulnerable to exploitation. The Government and the FCA need to do more so all mortgage prisoners get a fair deal and fair treatment.


The APPG’s 6 main recommendations to ensure that as many mortgage prisoners as possible can benefit from the changes include:


  • The changes to the affordability test must be implemented quickly: The FCA should publish a policy statement by the end of July and implement the changes immediately.

  • The scope of the modified affordability test should be as wide as possible: It must be available to customers in arrears, home movers, those consolidating their ‘Together’ unsecured loans and victims of domestic violence or controlling behaviour needing to remove one person from the mortgage. Interest-only customers should be allowed to convert to a repayment mortgage.

  • The modified affordability test should be compulsory for mortgage prisoners switching within firms or banking groups: The FCA should stop firms exploiting mortgage prisoners by leaving them in closed books or inactive subsidiaries within larger banking groups.

  • The changes to the affordability test should be communicated by the mortgage providers quickly, clearly and effectively to mortgage prisoners: Mortgage prisoners should get a letter within 3 months and reminders at 6 and 12 months and details should be included in annual mortgage statements.

  • Stronger protection for customers including a requirement to give advanced warning of an intention to sell a mortgage book and a ban on sales of mortgages to unregulated entities, inactive lenders and vulture funds: The FCA should also introduce the requirement to offer existing customers new deals set out in the UK Finance voluntary agreement into regulation.

  • Active lenders should not unreasonably refuse to apply the modified affordability test to new customers who are currently mortgage prisoners with another lender: Firms should ensure that the default is to apply the modified affordability test to relevant customers switching from another firm and should only depart from this in exceptional circumstances.

The APPG's full response to the consultation can be accessed here.


The APPG is continuing with its inquiry and the terms of reference can be accessed here.


The APPG is particularly interested in hearing from mortgage prisoners concerning, their situation, their current lender and interest rate, their type of mortgage, how being a mortgage prisoner has affected them and their families and what changes they would like to see introduced.


Submissions can be made by email: APPGmortgageprisoners@gmail.com

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