FCA has published a guidance consultation setting out how it expects firms to ensure they treat customers fairly where the customer cannot repay the capital sum on an interest-only mortgage at the end of the term. The guidance includes examples of good and poor practice, and states FCA expects firms to:

  • have a written policy strategy;
  • consider the reasons for offering (or not offering) various options;
  • ensure front-line staff know the firm’s policy and how to implement it, and monitor these staff;
  • make sure management information allows the firm to monitor its back-book;
  • communicate regularly and early enough with customers who may be in danger of failing to repay;
  • give customers time to consider maturity options;
  • assess affordability if variations are likely to significantly increase repayments or extend the loan into retirement; and
  • consider the position of “trapped” customers who cannot transfer their mortgages to another provider.

FCA asks for comments by 3 June. (Source: FCA Consults on Interest-Only Mortgage Repayments)