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By Chris Bramham

Brief: “Is the loss of the FCA’s transitional rules for the treatment of ‘mortgage prisoners’, due to European insistence, another example of compliance rules working against rather than for the best interests of customers?”

The loss of transitional rules is definitely all about compliance rather than the needs of the customer. The FCA made it clear in the MMR that lenders both could and should apply transitional arrangements for those wanting to move their mortgage onto a lower rate. If someone was not increasing their debt and would be better off as a result of remortgaging it was clear that they would not need to go through a full affordability assessment, however few lenders have put this into practice to date.

The EU is about to make changes to the transitional rules by removing the reduced affordability assessment. As a result we have a window of ten months before the Mortgage Credit Directive (MCD) is introduced next March, to do the best by customers and help them to move onto better rates.

We have an opportunity to move a person off quite penal products onto something more affordable, which is clearly in the best interests of the customer, the question is will lenders in the UK make this possible before next March? It presents a huge opportunity without massive exposure for a lender but no-one has done it yet and I think they are missing a trick.

The only people who seem to be taking this seriously are some of the smaller mutuals, but if they do not move quickly it will be too late. Realistically while it is ten months until the MCD is introduced a borrower would need to have started the process by Christmas in order to ensure that their mortgage or loan would be completed in time.

As a result of current lender intransigence a lot of people who are more than capable of affording their mortgage and who have an impeccable payment history are trapped on rates that are far too high with little chance of ever being able to move unless they get a pay rise, a significant amount of their equity is paid off or their children move out, significantly reducing their outgoings.

This is definitely working against the best interests of customers. How can it be in a customer’s interests to be trapped in a property on a rate of four or five per cent when there are rates out there of sub two per cent?

My call would be for lenders to look at relaxing their rules, or even introducing special products to enable people with the right payment history to move mortgage if they choose to and for everybody who has any influence at EU decision making level to lobby for these rules to be softened.

While the MCD final rules paper has already been published we are expecting a revision to it in a couple of month’s time. I sincerely hope that during this time there will be a softening of the rules that were, after all, put in place with the objective to protect the borrowers’ best interests.