FCA Mortgage Prisoner Review

The FCA has published its Mortgage Prisoner Review and HM Treasury has laid it before Parliament.  The BSA's Head of Mortgages and Housing, Paul Broadhead,comments.

Today the FCA has published its Mortgage Prisoner Review and HM Treasury has laid it before Parliament.

Paul Broadhead, Head of Mortgage and Housing Policy at the Building Societies Association commented

"We recognise the importance of helping those mortgage borrowers that are trapped on standard variable rate loans because their lender is no longer active or is unregulated and does not therefore offer any new mortgage products. 

"Rule changes in 2019 resulted in positive action being taken by a number of building societies and banks which have modified their lending criteria, enabling them to consider applications from these mortgage prisoners, although demand from these borrowers remains low.  

"We welcome the additional information from the Financial Conduct Authority today and we'll continue to work with our members to determine what more we can do to further support these borrowers.

"In the meantime, we would encourage those affected to spend a few minutes completing the Money Helper mortgage prisoner eligibility tool, which offers advice on how borrowers can improve their likelihood of moving to a new mortgage and details of where independent information is available.  The FCA has identified some 66,000 mortgage prisoners who may already be able to switch."


Notes to Editor:

The full FCA review can be found here

From a population of 195,000 mortgages in closed books with inactive firms, the FCA review identifies the following subgroups.

  • 66,000 who may be able to switch. Where borrowers have not yet tried to switch, consumer organisations or a mortgage intermediary may be able to help them assess whether they can save money, or otherwise benefit, by switching. The FCA has put together some case studies that may help.
  • 30,000 who can’t switch but are unlikely to benefit from switching anyway. They are up to date with payments but can’t switch because of their loan and/or borrower characteristics. However, the interest rate they’re on means they’d be unlikely to save money from switching- so they aren’t mortgage prisoners.
  • 47,000 who are mortgage prisoners. Despite being up to date with payments, they cannot switch when it might benefit them to do so, because they have loan and/or borrower characteristics that are outside current lender appetite.
  • 34,000 who are in payment shortfall, and 18,000 who are near term. These borrowers wouldn’t be able to switch to a new deal, even if they were with an active lender. 

The Building Societies Association (BSA) represents all 43 UK building societies, as well as 6 credit unions. Building societies serve over 25 million customers, have total assets of over £477 billion and, together with their subsidiaries, hold residential mortgages over £351 billion, 23% of the total outstanding in the UK. They hold over £328 billion of retail deposits, accounting for 18% of all such deposits in the UK. Building societies account for 40% of all cash ISA balances. They employ approximately 43,000 full and part-time staff and operate through approximately 1,380 branches.