PS19/27: Changes to mortgage responsible lending rules and guidance – feedback on CP19/14 and final rules

Read PS19/27 (PDF)

In CP 19/14 we set out our concerns that some consumers cannot switch to a more affordable mortgage despite being up to date with their mortgage payments.

This includes those who can’t switch because of changes to lending practices during and after the 2008 financial crisis and subsequent regulation that tightened lending standards – often called ‘mortgage prisoners’.

We concluded that consumers in this position, or who could be in this position in the future, are suffering harm, as they are paying higher than necessary mortgage payments.

We are therefore amending our responsible lending rules and guidance help remove potential barriers to consumers switching to a more affordable mortgage and to reduce the time and costs of switching for all relevant consumers. The changes will mean that:

• mortgage lenders can choose to carry out a modified affordability assessment where a consumer:
  
  • has a current mortgage
  • is up-to-date with their mortgage payments (and has been for the last 12 months)
  • does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage
  • is looking to switch to a new mortgage deal on their current property
• inactive lenders, and administrators acting for unregulated entities, must review their customer books and develop and implement a communication strategy for contacting relevant consumers to tell them it could be simpler for them to remortgage
• mortgage lenders that use the modified assessment must tell consumers the basis on which their affordability has been assessed and provide additional disclosures about potential risks
• mortgage lenders are required to report which sales have involved the modified assessment when they submit Product Sales Data (PSD) to us.

Who this applies to

This policy statement will be relevant to:

• mortgage lenders
• mortgage administrators
• mortgage intermediaries
• unregulated entities that own mortgage books
• mortgage customers
• trade bodies representing mortgage firms
• charities and consumer organisations

Next steps

All the rules outlined in this Policy Statement come into force immediately.

If you are a lender, you can choose to start using the modified assessment as soon as you are ready to do so.

We will publish the technical documents (Data Reference Guide) in February 2020.

If you are an eligible consumer looking to switch based on the modified assessment, we recommend you check the MoneyHelper (formerly the Money Advice Service) website.