Banks and building societies have been urged to consider changes to lending criteria to help so-called ‘mortgage prisoners’.
The Financial Conduct Authority (FCA) has reviewed the situation of around 47,000 borrowers who could benefit from a cheaper home loan but are currently unable to move.
The review looked at the position of borrowers whose loans were sold on to new lenders after the financial crisis. At the last count, it found about 250,000 borrowers were affected, but the number has fallen as some borrowers have been able to move.
The FCA found that there were about 195,000 households whose debts had been sold on to inactive lenders and that a quarter of them could save money if they were allowed to switch to a new deal.
However, despite changes that have made it easier for banks to offer these borrowers home loans at a better rate than the one they are currently paying, the FCA found that demand from customers and supply from lenders has been low.
The FCA said: ‘We hope that more mortgage prisoners will be able to switch their mortgage. We encourage lenders to consider if they can amend their lending criteria to lend to mortgage prisoners who are close to their risk appetite.’
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