The FCA has released its first report analysing the impact of the Mortgage Charter. Launched exactly a year ago, the Charter received some negative industry comment, with a number of lenders suggesting that they already had robust forbearance measures in place and it wasn’t needed. However, on any measure, the FCA data shows positive consumer outcomes.
The update shows that around 1.1 million mortgages have benefited from one or more Charter options. Around 113,000 mortgage holders took advantage of temporarily reduced payments, and between July 2023 and April 2024 monthly payments on around 159,000 mortgages were reduced as borrowers switched to paying interest-only temporarily, or extended their mortgage term. Clearly these are positive consumer outcomes for those taking advantage of the Charter.
Despite the positive data from an outcomes perspective, mortgage arrears are continuing to climb across all metrics. For example, at the end of Q1 this year, UK Finance year-on-year comparisons showed significant increases in arrears across all categories. In the range of arrears totalling 5% to 7.5% of the mortgage balance, year-on-year results show a whopping 41% increase. Whilst we hear comments that the numbers are not significant when comparing with historic levels, we also see lenders beginning to plan for a substantially deteriorating position.
Compliance with FCA requirements, Charter commitments and vulnerable customer treatment are all firmly back in the regulator’s gaze. The FCA is clear on where it stands, by pro-actively monitoring the mortgage market through consumer level data and firm engagement. As well as the FCA (on a conduct basis) taking an interest in these matters, dual regulated firms will know the PRA is keeping a close eye on lender arrears, from a prudential and operational risk perspective.
Whether you are a funder, originator, servicer, or holder of a mortgage book you will be aware that your arrears performance is currently under close scrutiny. Our people are all appropriately experienced subject matter experts, and we are in a great position to provide independent support and oversight on these and other risk matters. Get in touch to discuss how we can help with your Charter compliance and forbearance decisioning and remember to ask for a copy of our regulatory compliance case study, to see how we collaborate with clients.