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FCA Consultation Paper, CP 19/14 opens

On 26th March 2019, the FCA issued open consultation paper, CP on proposed changes to Responsible Lending rules together with their finalised report on their Mortgage Market.

The CP proposes to address the FCA’s concerns that consumers were unable to switch to more affordable mortgage products despite being up to date on their payments because of changes to lending practices post the financial crisis in 2008.

Impact

The FCA are seeking to remove potential barriers to consumers switching to more affordable mortgage products. The following rule changes are proposed to enable switching, including switching from an unauthorised lender where the consumer is up to date on their mortgage payments.

  • Mortgage lenders can choose to carry out a modified affordability assessment (‘modified assessment’) where the consumer:
    • a) has a current mortgage
    • b) is up-to-date with their mortgage payments
    • c) does not want to borrow more, other than to finance any relevant product fee or arrangement fee for that mortgage
    • d) is looking to switch to a new mortgage deal on their current property
  • inactive lenders, and administrators acting for unregulated entities, are required to review their customer books and contact relevant consumers. They must then write to them highlighting this rule change and directing them to relevant sources of information
  • mortgage lenders that use the modified assessment are required to tell consumers the basis on which their affordability has been assessed and provide some additional disclosures about potential risks
  • mortgage lenders are required to flag which sales have involved the modified assessment when they submit Product Sales Data (PSD) reports to the FCA

Timeline

The Consultation closes on 26th of June 2019 with Policy Statement, i.e. the revised rules to follow in Q3, 2019.