The Financial Conduct Authority (FCA) has stated they are disappointed in how mortgage lenders are treating those vulnerable borrowers in arrears and reported on the key issues.
Although the regulator did find customers in long-term financial difficulty are generally treated well by mortgage lenders, many were not receiving an adequate level of support because their vulnerabilities were not being identified.
In its thematic review of long-term mortgage arrears, published on the 6th December, the FCA discovered some inconsistencies that could result in a disappointing experience for customers and have the ‘potential to cause harm’. Isolated examples were discovered when customers on high-interest rates could not recover from their arrears position, and their mortgage debt continued to increase.
Some examples of firms’ mismanagement include:
The FCA reported that there are now 14,000 more households in serious arrears than in 2008. Low-interest rates mean that those in arrears on their mortgage are not seeing their debt spike, yet there is an expectation that rates will rise which will put more pressure on these homeowners.
Executive Director of Supervision, Retail and Authorisation at the FCA, explained:
“We found that the number of homes in serious arrears has risen to 70,000, but repossession rates per year have dropped to 2.7 per cent.
It makes sense to forbear when interest rates are low. If interest rates start to go up, I’m afraid the repossessions will also rise.”