The FCA has issued its latest statement on mortgage switching, amid Bank of England warnings of a looming recession and its decision to hike interest rates by 50bps.
The FCA's most recent analysis found that over two million mortgages (26%) are on variable rates, with around half of these mortgages on reversion rates (such as a standard variable rate) - those most exposed to changes in the Bank's base rate. Amid the rising cost of living, the FCA statement underscored the importance of borrowers switching their mortgage deals if and where they can and it is in their interests to do so.
Renewed expectations for lenders
The FCA statement warns lenders that - against the current economic backdrop - they should not be complacent regarding steps they have in place to encourage borrowers to switch at the end of their fixed or introductory mortgage deal.
In the regulator's recent Dear CEO letter, the FCA reaffirmed its expectations of lenders (from providing an appropriate level of care and support to ensuring that fees and charges on borrowers in financial difficulty are fair and do no more than cover the firm's costs). In addition, the regulator noted that its tailored support guidance (TSG) for mortgages - introduced in view of Covid 19-related difficulties for borrowers - is also relevant for borrowers in financial difficulty due to other reasons, not least the cost-of-living crisis.
Before the watershed - changes ahead of the Consumer Duty
Under the FCA's incoming Consumer Duty, all firms will be required to heighten their focus on customer outcomes - not least in respect of communications that facilitate better customer understanding. The FCA statement makes clear that firms shouldn't wait for the Consumer Duty's introduction in 2023 / 2024 to review their overall approach to communicating information "to make sure they equip consumers to make effective, timely and properly informed decisions".
While the FCA statement suggests that there no justification for further regulatory intervention at this time, it is continuing to monitor market practices closely. The regulator has warned that it will consider taking further action if the situation changes, or it sees evidences of practices similar to the 'loyalty penalty' harm in the general insurance market.
We will continue to monitor the market and if the situation changes materially, or we see evidence of practices similar to that previously seen in the GI market, we will consider what further steps we may need to take.