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APPG response to FCA consultation: More action needed to protect mortgage prisoners

The APPG has published its response to the FCA consultation CP 20/13: Removing barriers to intra-group switching and helping borrowers with maturing interest-only and part-and-part mortgages

Seema Malhotra MP, Co-Chair of the APPG on Mortgage Prisoners said:

"We are concerned the FCA is underestimating the detriment being caused to mortgage prisoners. The regulator says that the SVRs some mortgage prisoners are paying are on average only 0.4% higher than the SVRs at other active lenders. This ignores the fact that if these mortgage prisoners were with active lenders they would have access to fixed-rate deals which would reduce the interest rates they are paying by between 2.3% and 3.5%. These more realistic figures produced by the APPG show that the detriment is around six to eight times greater than that acknowledged by the FCA.

The FCA needs to use real case studies involving mortgage prisoners to better demonstrate the real misery being caused by the failure to take robust action to ensure that customers are treated fairly. Mortgage prisoners are overpaying by hundreds or thousands of pounds each year, causing a significant negative impact on themselves and their families, leading to constant stress and relationship breakdown.

The APPG has in the past called for banks to be forced to apply streamlined affordability tests when allowing mortgage prisoners to switch to better deals offered by the same banking group. The proposal from the FCA to allow firms to use a streamlined approach when a mortgage prisoner is switching within a larger group is welcome but the only way in which it is going to help mortgage prisoners is to make it compulsory. It is unclear why the FCA would think that large banks and building societies which have exploited mortgage prisoners for years by holding them in separate subsidiaries or closed mortgage books will willingly offer better deals. The extension of the prohibition on repossession of interest-only mortgage customers who are making their monthly interest payment to 31 October 2021 is good news and will provide temporary relief to thousands of customers. This must apply to all interest-only customers whose mortgage has already matured or matures at any point up to 31 October 2021. Alongside this extension, the FCA needs to amend its guidance so that all interest-only customers are offered a full range of options at the end of their mortgage term. Unfortunately, what is glaringly missing here is any help for the tens of thousands who are caught with vulture funds, and who have no hope of accessing better deals with their existing provider unless the FCA intervenes to cap interest rates."


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