Since then, it has refined its definition of a mortgage prisoner to the 47,000 borrowers, part of the 195,000 mortgages in closed books as of 2021.
The FCA loosened its rules in 2020 to allow lenders to assess affordability based on a mortgage prisoner’s track record of making mortgage payments if they are not looking to move house or borrow more.
It also established a list of mortgage intermediaries willing to help mortgage prisoners, which was hosted on the Money and Pensions Service’s site.
However, a 140-page mortgage prisoners review from the City watchdog, published by the government a year ago found a lack of lender risk appetite and lack of engagement from borrowers meant fewer borrowers have switched mortgages than expected.
It showed the number of mortgage prisoners engaging with brokers on the regulator's dedicated list had declined steadily over the 2021, resulting in a mere 26 mortgage offers being made to borrowers over the course of 10 months.
Following the publication of this report, the Treasury promised to commit to ‘practical’ solutions for mortgage prisoners. It said it would seek “further engagement with inactive firms” as part of its post-review follow up “to help as many affected borrowers as possible switch to an active lender”.
One practical solution the Treasury cited for mortgage prisoners was taking advantage of the modified affordability assessment, which the FCA announced back in 2018.
It allows lenders to carry out partial, rather than full, affordability assessments on borrowers which fit the mortgage prisoner profile.
ruby.hinchliffe@ft.com
