Where the modified assessment has been applied, lenders will be obliged to tell borrowers the basis on which their affordability has been assessed and provide information about any potential risks. Lenders will also be required to report any sales involving the modified assessment to the FCA in their product sales data.
However, lenders will not be obliged to use the new criteria and will be able to choose whether to apply it. The FCA acknowledges that some of these borrowers will have circumstances that are outside many lenders’ risk appetites.
The measure of success
In November 2018, the BBC documentary programme Panorama featured the plight of thousands of former Northern Rock borrowers who had become mortgage prisoners, after their mortgages were sold to private equity firms and other organisations that were not authorised to lend and consequently had no motivation to offer better deals to their new customers. At the time, Ray Boulger, John Charcol’s mortgage expert, said the government’s failure to subject itself to its own regulations had contributed to the predicament of these borrowers.
If these rules come into force, it should mean that many of these borrowers who have been refused other mortgage deals, despite maintaining their mortgage payments, could be eligible for a better deal.
