I was somewhat surprised over the weekend to hear reports that the FCA Chief has now started to make the same arguments on the issue of Mortgage Prisoners that we did back in 2016. I also want to breakdown just how much the FCA have cost UK borrowers and explain why it is time for FCA Chief Andrew Bailey to resign.
Our history on this stretches all the way back to late 2015 when we announced the launch of SelfCert.co.uk, how it would be based in Prague and operate under passporting rules back to the UK over the net.
The reason it would be based out there is that back in 2014, the FCA basically banned the product that is Self Certification for income on mortgage products from being based in the UK. This is despite them allowing it, on Car Finance, Unsecured Loans, Credit cards etc. The principle of Self Certification is permitted on riskier finance agreements, just not on safer mortgage products.
I don't want to go over the old ground regarding the rights and wrongs of SelfCert, so I'll stick to our main point here about mortgage prisoners.
Around 80% of those that applied to SelfCert.co.uk back in 2016 were, what would be described as mortgage prisoners. Only 20% or so were first time buyers or moving home. Out of these 80% mortgage prisoners we learned of some insane instances of people who just needed to borrow 25% of their home value yet were being declined by the FCA's rules. These people had 75% equity and couldn't get a mortgage in the UK. This meant they were stuck on mortgages that in some cases were charging them three times more than we would have.
Our argument back in 2015/2016 was that if people could show evidence that they were consistently paying £2000 a month, either in rent or mortgage repayments. That in itself was a sign of affordability and that they could make repayments on a SelfCert mortgage of £1000 a month. The FCA dismissed this argument. We made this argument over and over, it's documented on this site and elsewhere. It's not hindsight. We knew this before we launched, and our predictions were confirmed within the first 100 applications that came in.
You can imagine my surprise then when I see reports that the FCA's Chief is writing to the Treasury making this very argument to help so-called mortgage prisoners. As far as I know, nothing dramatic has happened in the last three years that should have made him change his mind now. The evidence has always been out there, clear as day.
The trouble is that damage has already been done.
The BBC reports that the FCA has said that they've identified 150,000 customers. The way the story is written means we assume they mean just former Northern Rock customers who were moved to higher rates and not allowed to move away from them to cheaper rates. If that was only Northern Rock customers, then the true scale of this across all lenders might be upwards of 500,000 people who have been stuck on a higher rate because of the FCA 's policy.
Some applicants told us they were paying 7% on their mortgages and weren't allowed to switch to mortgages at a market rate of 3-4% because of the FCA.
Mortgages they weren't allowed to switch from due to FCA rules. Even though mortgages on the market were available at 3-4%.
This is shocking, and this is how shocking it is.
Sticking to what we know for sure. The BBC quotes that the FCA has identified 150,000 borrowers in this situation. Again we think it’s much higher, but we can’t be sure so we will stick to the more conservative figure.
If each of those borrowers was paying twice as much as they should have, which on average would mean an extra £200 a month in our estimates. That means, we think borrowers were overpaying by £30,000,000 a month. £30m over the 36 months that Andrew has delayed the issue since he has been in post, and since we started in 2016, means over £1,080,000,000 has been overpaid to the banks and building societies. That’s £1.08 billions in 3 years. Add to this, those who have lost their homes over the years.
We know there are non-bank investors out there who are crying out to be allowed into this market. We know this because we had many offers of investment, all of which we declined. We know that there are tens of thousands of borrowers trying to get better deals but can't prove their incomes and the one thing that is stopping them coming together in the UK is the FCA.
Will the FCA repay these people this money? Surely someone should be holding the FCA to account for this?
Either way, it has to be time for the FCA Chief Andrew Bailey to explain the delays, explain if SelfCert mortgages are allowed for UK mortgage prisoners once more or do the honourable thing and walk.
Are UK SelfCert mortgages now back for mortgage prisoners? Who knows!