This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
On Thursday, the UK Financial Conduct Authority (FCA) told mortgage lenders that is may take regulatory action against them if they fail to adhere to guidelines on how to treat borrowers with long-term arrears on home loans.
The City watchdog said that despite the number of homes being repossessed declining, the number of borrowers in long-term arrears was increasing. This widening trend led the FCA to review numerous arrears cases at banks, building societies and other lenders, with the regulator discovering some ‘disappointing’ lending practices.
Lenders fail to prevent harm to borrowers
Under the regulator’s guidance on arrears management, lenders are expected to make ‘reasonable efforts’ to help borrowers in long-term arrears for a year or more in agreeing repayment terms, with repossession seen as a last resort.
However, after the FCA had concluded its oversight of arrears cases it found ‘some inconsistencies in firms’ arrears management practices’ with vulnerable borrowers, particularly those on high interest mortgages, not receiving necessary support.
The FCA said that it has provided feedback to lenders it reviewed ‘and is considering where in some cases further regulatory action is necessary’.
FCA warns borrowers to not bury their heads
The regulator added that their findings were conducted against a backdrop of low-interest rates, making the arrears balances relatively low and stressed that borrowers already in arrears, and even those worried about falling into them, should act now.
'We know that many customers remain hesitant to contact their lender to discuss their mortgage arrears for a variety of reasons,’ Executive Director of Supervision at the FCA Jonathan Davidson said.
‘We encourage customers to talk to their lender as early as possible as this may give them more time and options when it comes to the steps they can take.’
‘The FCA encourages customers with arrears to engage with their mortgage provider about mortgage arrears and the options that are available to them,’ he added.
.jpg)
