FSA told to get finger out to help people struggling with mortgages
The Financial Services Authority (FSA) have been called upon to strengthen its proposals for borrowers who would struggle to move home or remortgage as a result of the regulator’s long-awaited overhaul of mortgages.
The Financial Services Consumer Panel, have warned that the current level of protection proposed for these borrowers is not enough. And last year, the FSA buckled to pressure from consumer groups after they'd been warned that the measures aimed at preventing a return to risky lending would trap millions of existing creditworthy borrowers and create 'mortgage prisoners'.
The FSA introduced new rules for existing borrowers that would allow lenders to be more lenient than they could be with new customers seeking a mortgage. However, the panel said it is concerned that the “level of protection for such borrowers might not be sufficient”.
As such, they've called for a new rule that would define the category of mortgage prisoners, with a provision to prohibit lenders from treating these consumers less favourably than other mortgage customers because they were “trapped”. While a lot of borrowers will be able to remortgage to a more competitive product, mortgage prisoners will be faced with a higher interest rate because they can't afford to move their mortgage elsewhere.
“We are concerned that there is discrimination against those borrowers with higher loan-to-value mortgages,” said Mike Dailly of the panel. “We think there needs to be a specific rule to protect these borrowers to make sure that they are not being unfairly discriminated against.”
The FSA's final regulation is expected to be announced in the summer.