FCA says 150,000 ‘mortgage prisoners’ need help switching to better deals

The UK's financial watchdog has said it wants to help around 150,000 "mortgage prisoners" who are trapped in their current borrowing find a better deal.

Releasing its interim report into the mortgage market this morning, the Financial Conduct Authority (FCA) said that there were a number of ways in which the industry could work better for some people and outlined proposals aimed at helping consumers find the best-priced deal.

It found that a "significant minority" of people, around 30 per cent of mortgage customers, were failing to find the cheapest product for them.

Read more: Fund manager Pimco close to £5bn deal for Bradford & Bingley mortgage book

“The revelation that one in three homeowners could have found a cheaper mortgage with the same features elsewhere, and are therefore overpaying by an average of £550 in the first year, is shocking," said Dan Hegarty, founder of online mortgage broker Habito.

"They may technically be the minority but with 2 million mortgage transactions a year, thats a huge number of people who should be better off."

The FCA said it would work on making it easier for consumers to compare mortgages and ultimately take them out, and helping longstanding borrowers who cannot switch by formulating an industry-wide agreement to approve new mortgage applications from customers whose most recent mortgage was taken out before the financial crisis.

Overall, the FCA found that there were around 30,000 consumers borrowing from firms which were authorised to lend who could benefit from switching but were unable to.

Read more: Top Bank of England official warns of risks building in UK mortgage market

This was due to major changes to how firms lent bought about during and after the financial crisis, including stricter affordability checks on mortgage applications.

Around 20,000 of these customers are with firms which are no longer active, which the FCA admitted would make them harder to help.

Another 120,000 people have had their mortgage legitimately sold on to firms which are not authorised to lend, and would also face barriers to getting a new deal with a different lender.

Read more: UK homeowners have earned enough to cover mortgage payments for 2018

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CityAM

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