Cutting your costs, fighting your corner
FOR IMMEDIATE RELEASE MONDAY 16TH MAY 2016
The FCA has admitted mortgage lenders "could be more proactive" in making sure homeowners don't become so-called 'mortgage prisoners' who are told they can't afford a cheaper mortgage deal. But its report published today stops short of outlining any concrete proposals to fix the problem.
Martin Lewis, founder of MoneySavingExpert.com has been campaigning to highlight the problem of 'mortgage prisoners' for more than a year, and met with the Chancellor George Osborne last week to discuss the issue. He has also raised this with the head of the FCA and the EU commissioner.
Commenting on the issue, Martin Lewis said:
"There is a mortgage ticking time-bomb in the UK. While mortgages look cheap, in truth they're incredibly expensive.
"The average standard variable rate is 4% higher than UK interest rates - before the credit crunch this margin was just 1.5%. That means if interest rates rise, millions will simply be unable to afford to repay. This problem is accelerated by the fact that you now need far more equity in your house to be able to shift to a cheap deal, meaning many are mortgage prisoners trapped on high rates.
"That is difficult enough to fix, but now we have an additional self-made problem that's exacerbating it, and sadly the FCA is just glossing over it, limply telling firms they could be 'more proactive' in making use of flexibilities and exceptions. In practice, many apply for remortgage deals but are rejected and ridiculously told 'you can't afford a cheaper deal', as they fail the FCA's affordability tests which don't take account of the fact people already have the debt.
"This happens even where people aren't borrowing more and their circumstances haven't changed. This makes no sense and the rules need changing. Last week I met the Chancellor on this and he's promised to look into it – we need to stop this issue before it becomes a full-blown crisis."