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FCA guidance for lenders to support borrowers - does it go far enough?

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 09. December 2022

Looking to speak to mortgage brokers about the draft guidance the FCA released yesterday on how lenders can support existing borrowers with cost of living crisis. 

https://www.mortgagesolutions.co.uk/news/2022/12/07/fca-opens-up-guidance-on-how-to-support-existing-borrowers-with-cost-of-living-crisis/ 

Forbearance measures mentioned are monthly installments, contract variations such as term extensions and temporary switches to interest-only.

  1. Do you think the guidance goes far enough? Are there suggestions that could cause more problems?
  2. What would you like to see from lenders on forebearance? What suggestions would you make?

 

4 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
I would consider the help provided to be sufficient, as long as lenders abide by these guidelines too. Help needs to be for a short period, for example, the switch to interest-only should be for no more than 12 months at a time. That will buy some valuable time for those to review their finances, and see how rates may change over the next year or so. Most of these mortgages would have been stress-tested at rates similar to those available in the market, so a review of other expenditures is just as vital. For example, the trend to lease expensive cars over the last few years has seen some significant monthly direct debit commitments, which may be more problematic than an increase in mortgage costs.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The most importance measure in these guidelines is the temporary switch to interest-only for borrowers. The problem the banks will have is measuring if it’s a temporary problem, such as a job loss, or whether the borrower can’t handle the increased rates and the issue is less transient. It’s good to see the FCA finally issuing guidance on this, as they seem to have gone missing during this crisis thus far.
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Gary Boakes
Director at Verve Financial
I've read a lot of people saying interest-only will cause long-term issues and we are just moving a problem down the line. Interest-only will ultimately help in the short term and will help people through the current cost of living crisis, as the saving they will make over 1-2 years will be bigger than a payment holiday for 3 months. But why stop at the short term, as with the right education and innovation in products interest-only could be a massive advantage long term. Long term this could lead to increased savings, larger pension funds, and spending more into the economy and there will be a more fluid movement of houses as people downsize and release equity.
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Austyn Johnson
Founder at Mortgages For Actors
If Advisers as a whole, looked at the bigger picture and treat every person as a whole new case and not just 'another one', then I would expect the landscape to change. Higher procuration fees from lenders would help to get Advisers to spend more time on each case, making sure they did the job properly. There are already many rules and regs for speaking with clients, but these are based mainly on F2F meetings. Most new business is carried out over the phone nowadays, so will always have a bit less of a personal touch.
I think the FCA lays out well enough rules, maybe too many, but then they also know that some advisers will not always stick to every single one. The new requirements for vulnerable clients is an indication of this. Surely we should be identifying if our clients need a bit more help, right from the start anyway?