The Association of Mortgage Intermediaries (AMI) has encouraged the Financial Conduct Authority (FCA) to reassess the issue of ‘mortgage prisoners’
In response to the FCA’s Responsible Lending Thematic Review, which said that there was no ‘obvious’ issue, NMG Consulting and the AMI conducted research that found 86% of brokers believe there is still a mortgage prisoner issue.
A homeowner is said to be a mortgage prisoner when they are faced with being left on expensive standard variable rates due to tougher mortgage application rules.
The research also found that among the brokers who believe it is still an issue, a quarter ‘felt that the problem was getting worse’, while the remainder felt ‘circumstances were improving’.
Additionally, 76% of brokers surveyed found that one in 10 clients were mortgage prisoners, 18% said between one and two out of every 10 clients were trapped in this scenario and 6% said more than two in 10 of their clients can’t get a new deal.
Robert Sinclair, chief executive of AMI, outlined the issue.
“Despite the assurances from lenders, lender trade bodies and our regulator, we continue to hear evidence [from] our firms of a continuing problem.
“While interest rates remain low, the issue is unlikely to surface significantly.
“However, as soon as rates rise, we have no doubt that what is a trickling stream will become a flood and the industry will have to address matters.
“This covers a range of issues, including weak loan to value, prior self-certification, interest only, self-employed and those with credit blips, but a good mortgage payment record.
“We hope that the supervision teams at FCA begin to take this seriously and look properly at the extent of this issue and whether all lenders are acting in the best interest of all their mortgage customers.”