Residential lenders have pledged to contact thousands of the “mortgage prisoners” in order to offer them with alternative deals that have lower interest rates.
Almost 60 active lenders, who make up approximately 93 percent of the residential mortgage market of the United Kingdom, have established new common standards which will imply that they are obliged to contact as many as 10,000 homeowners who are possibly confined in more expensive deals than they should be.
Having been established together by UK Finance, a trade body, the new pledge comes after a report that was by the Financial Conduct Authority (FCA) last July which examined what the lenders could do to help the “mortgage prisoners.”
The said report distinguished 150,000 borrowers who have not been able to receive a better deal after their existing mortgages shifted to the more expensive standard variable rate. Approximately 120,000 of the customers are with non-regulated companies and around 20,000 are with inactive lenders.
While the customers will still not be able to explore the broader mortgage market for a much affordable deal, the said agreement is aiming to make sure that lenders who have not already contacted the borrowers will do so to give them the chance to change their mortgage rate.
The head of the mortgage and housing policy at the Building Societies Association, Paul Broadhead, stated: “By signing up to this voluntary agreement lenders will ensure that existing borrowers are not disadvantaged by the changes to mortgage regulation since the financial crisis. The agreement formalises the actions that many societies have been taking and provides clarity and confidence for all affected borrowers.”
The director of mortgages at UK Finance, Jackie Bennett, stated: “We expect more lenders to participate in the coming months. Furthermore, we will be working closely with the FCA and active lenders to see what might be possible for customers of inactive and unregulated lenders.”