New clauses proposed to allow the Financial Conduct Authority to regulate the management of a regulated mortgage contract
Three amendments to the Financial Services Bill that were written to assist mortgage prisoners were opposed by John Glen MP in a parliamentary debate.
New clauses 24, 25 and 26 proposed, in order, to extend the FCA’s regulatory perimeter to allow it to regulate the management and ownership of a regulated mortgage contract, to cap the standard variable rate payable by borrowers who can’t switch to a different lender, and to require lenders to seek written permission from a borrower before transferring a loan.
Glen, who is the economic secretary to the treasury and the City minister opposed all three, saying: I’m afraid that these amendments risk a number of unintended consequences and would be disproportionate to support a small number of borrowers.
He went on to say that the beneficial owners of the “vast majority” of firms that manage mortgage activities to not themselves manage relevant activities. Therefore, extending the FCA’s oversight to ownership would also have little impact on consumer outcomes.
He continued: It’s important to emphasise that extending the perimeter would not allow consumers to access new deals or cheaper rates that they could not already.
This amendment not only seeks to extend the FCA’s remit to more firms that engage in mortgage lending, but also to the type of mortgages that are regulated. And this would bring in to regulated scope lending such as buy-to-let lending and would fundamentally reshape the regulation of the mortgage market in the UK, he said.
Regarding the second amendment, Glenn commented: Data from the FCA suggests a narrow majority of borrowers with inactive lenders by 3.5 per cent interest and compared to those with similar lending characteristics, consumers with inactive lenders only pay marginally more – 0.4 per cent than those with an active lender.