The announcement that the amount of remortgage deals have dropped by 6% has led some experts to accuse lenders of distorting the rules in order to prevent customers getting better prices. They argue that banks are ìmisinterpretingî rules and preventing customers moving from their expensive standard rates.
The rules they refer to were introduced in April 2014. Figures released show that the number of remortgage loans dropped from 324,100 in 2013 to 303,100 in 2014. The Council of Mortgage Lenders revealed that the figure for 2014 was the lowest it has been since 1997.
Ray Boulger who works for the mortgage and remortgage adviser John Charcol commented on the situation: ìYouíd expect to have seen a big pick-up in the remortgaging market because of the low fixed-rate deals available, but we havenít. This is partly because of a rise in the number of ëmortgage prisoners.íî
The drop is supposedly caused by the implementation of the latest Mortgage Market Review regulations. These regulations compel lenders to conduct rigorous background checks on the customers seeking a loan to safeguard that they can meet the repayments. This background check is made harder by the fact the applicant needs to be able to meet repayments if interest rates grow steeply in the future.
The lenders have rebutted these criticisms by arguing that they are deliberately cautious when it comes to lending because they fear being punished by the regulator. They have called on the Financial Conduct Authority to offer a higher degree lucidity on the regulations and the flexibility with which they can manipulate them. In response, the FCA have said that the lenders are ignoring ìcommon senseî in a number of incidents and pledged to investigate the application of the new rules.
Paula Higgins is a member of the HomeOwners Alliance and stated: ìMany people are in a mortgage trap. When they first moved house and took out the mortgage, they were told they could afford it. But now, when they try to get a new deal they are told they can no longer afford that loan, despite keeping up with the repayments. The consequence is that they are paying more than they should be because they are stuck on a default rate.î