The City regulator may seek more powers to help “mortgage prisoners”, a boss there has suggested.
Chris Woolard, executive director of strategy and competition at the Financial Conduct Authority (FCA), said some mortgage customers are unable to switch, even though they would benefit from doing so.
He said: “This is the case for those often-called mortgage prisoners – home owners who took out mortgages before lending practices and regulation changed after the financial crisis.”
Mr Woolard said: “We have the answer for authorised firms.
“I want to see an answer in the unauthorised space. If need be we will also discuss with Government whether a change in our regulatory perimeter or any other Government support is needed to protect those customers where mortgages are transferred to the unregulated sector.
“It simply isn’t an acceptable argument to hide behind the intricacies of our regulatory perimeter when real families are involved.”
Work is already being done to help mortgage prisoners, with a voluntary arrangement agreed earlier this year allows customers of active lenders to switch if they meet standard criteria.
But Mr Woolard, giving a speech at the UK Finance annual mortgage conference, said that while there is a potential group of at least 10,000 customers this may help “the question of customers of inactive or unregulated lenders is a harder nut to crack”.
He said: “We have identified about 20,000 customers in the closed books of authorised lenders, and a further 120,000 customers whose mortgages are held by firms that are not authorised, who may be able to benefit from switching.”
He told members of the mortgage lending industry: “This is a complex issue; one that will require creativity from us and a coordinated effort from you.”
Mr Woolard also highlighted the issue of later-life mortgage lending and said the range of equity release products on the market is on the rise.
He said that while the FCA is behind innovation: “To ensure that innovation lives up to its promise – and doesn’t fall into the trap of unintended consequences – we are looking to firms to use their common sense when lending, and make sure they’re matching the right products to the right consumers.
“Past experience shows that when lenders compete on loosening their criteria, it does not end well – for consumers or firms.
“When it comes to later life lending, the assessment firms make about a borrower’s ability to afford repayments over the long term could have a dramatic impact years later on their life.”