On 16 May 2016, the Chancellor, George Osborne, issued a letter to mortgage lenders following the FCA’s publication of its thematic review on responsible lending.
In his letter, the Chancellor commended the positive results of the report and highlighted that responsible lending is important from a prudential as well as consumer protection perspective.
The Chancellor emphasised that there should not be barriers for consumers in accessing financial services they need and can afford. In particular, the Chancellor emphasised the need for existing borrowers to be able to make changes to their mortgages to make them more affordable. This is following a meeting which took place on 12 May 2016 between the Chancellor and industry experts, that discussed concerns around the large number of mortgage prisoners, trapped in their mortgage deal, following the Mortgage Market Review (MMR).
The MMR enabled lenders to waive the need for an affordability check on existing borrowers trapped by the rule, provided no additional borrowing is granted or there is no material impact on affordability. The Mortgage Credit Directive, which came into force on 21 March 2016, requires that affordability checks should be carried out if borrowers are switching from one mortgage lender to another.
The Chancellor reminded lenders of this flexibility and concluded his letter by highlighting the importance of consumers being able to access cheaper deals, making the mortgage market work better for lenders as well as consumers.