Proposals by the FSA to put transitional arrangements in place to help mortgage prisoners are too onerous and will not work, the Council of Mortgage Lenders has said.
It says the FSA should instead allow exceptions to lenders responsible lending policies, as long as loans still comply with the rules.
Borrowers who cannot remortgage typically revert to their lenders standard variable rate (SVR). But the CML says this is not such a bad option, pointing out that many borrowers who are not mortgage prisoners choose the SVR anyway.
The CML says that there are checks and balances to stop lenders raising their rates aggressively.
The FSAs transitional arrangement rules propose that new rules on affordability need not apply to existing borrowers looking to remortgage as long as they meet strict criteria, including requirements that there is no additional borrowing, monthly payments are no higher, the mortgage term is no longer and the customer has never had any arrears.
But the CML says: It is unlikely that many firms will be able to use the transitional arrangements, as proposed, to offer loans to customers seeking to remortgage away from an existing lender: the restrictions on lending new money, altering the term of the mortgage or the repayment method, or making other contractual changes are too onerous.
The new lender is not only prevented from changing many of the key features of the loan, but must also ensure it complies with rules to keep additional records on any business it accepts under the proposed transitional arrangements.
The CML says: We believe that more borrowers can be helped if the FSA were to consider a different approach, namely to allow exceptions to its policy on responsible lending for mortgage prisoners as long as the mortgage still complies with the rules.
The new lender is not only prevented from changing many of the key features of the loan, but must also ensure it complies with rules to keep additional records on any business it accepts under the proposed transitional arrangements.
But the CML argues that although lenders are unlikely to take on new borrowers under the proposed rules, they may have other options to help existing customers. With the borrowers agreement, it may be possible to make changes to the mortgage term, the method of repayment and other loan features, as long as such changes do not create a new contract.
But the CML argues that although lenders are unlikely to take on new borrowers under the proposed rules, they may have other options to help existing customers. With the borrowers agreement, it may be possible to make changes to the mortgage term, the method of repayment and other loan features, as long as such changes do not create a new contract.
The CML says: We believe that more borrowers can be helped if the FSA were to consider a different approach, namely to allow exceptions to its policy on responsible lending for mortgage prisoners as long as the mortgage still complies with the rules.
This would enable lenders to help customers in exceptional circumstances, and allow borrowers to increase their lending or monthly repayments where it is demonstrably in their interests to do so.
It says the FSA should instead allow exceptions to lenders responsible lending policies, as long as loans still comply with the rules.
Borrowers who cannot remortgage typically revert to their lenders standard variable rate (SVR). But the CML says this is not such a bad option, pointing out that many borrowers who are not mortgage prisoners choose the SVR anyway.
The CML says that there are checks and balances to stop lenders raising their rates aggressively.
The FSAs transitional arrangement rules propose that new rules on affordability need not apply to existing borrowers looking to remortgage as long as they meet strict criteria, including requirements that there is no additional borrowing, monthly payments are no higher, the mortgage term is no longer and the customer has never had any arrears.
But the CML says: It is unlikely that many firms will be able to use the transitional arrangements, as proposed, to offer loans to customers seeking to remortgage away from an existing lender: the restrictions on lending new money, altering the term of the mortgage or the repayment method, or making other contractual changes are too onerous.
The new lender is not only prevented from changing many of the key features of the loan, but must also ensure it complies with rules to keep additional records on any business it accepts under the proposed transitional arrangements.
The CML says: We believe that more borrowers can be helped if the FSA were to consider a different approach, namely to allow exceptions to its policy on responsible lending for mortgage prisoners as long as the mortgage still complies with the rules.
The new lender is not only prevented from changing many of the key features of the loan, but must also ensure it complies with rules to keep additional records on any business it accepts under the proposed transitional arrangements.
But the CML argues that although lenders are unlikely to take on new borrowers under the proposed rules, they may have other options to help existing customers. With the borrowers agreement, it may be possible to make changes to the mortgage term, the method of repayment and other loan features, as long as such changes do not create a new contract.
But the CML argues that although lenders are unlikely to take on new borrowers under the proposed rules, they may have other options to help existing customers. With the borrowers agreement, it may be possible to make changes to the mortgage term, the method of repayment and other loan features, as long as such changes do not create a new contract.
The CML says: We believe that more borrowers can be helped if the FSA were to consider a different approach, namely to allow exceptions to its policy on responsible lending for mortgage prisoners as long as the mortgage still complies with the rules.
This would enable lenders to help customers in exceptional circumstances, and allow borrowers to increase their lending or monthly repayments where it is demonstrably in their interests to do so.
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