On 22 October 2020, the FCA published Policy Statement 20/11: Removing barriers to intra-group switching and helping borrowers with maturing interest-only and part-and-part mortgages (PS20/11).
In Consultation Paper 20/13 (CP20/13), the FCA set out its concerns about a possible barrier in its rules to borrowers in ‘closed’ mortgage books (books which are closed to new customers) switching to a new mortgage deal with a firm that sits within the same group as their current lender. The FCA refers to this as ‘intra-group switching’. In CP20/13 the FCA proposed to amend its responsible lending rules so that lenders could choose not to undertake a standard affordability assessment or to use the modified affordability assessment, if a borrower seeking to switch to a new deal without borrowing more was in a closed book within the same financial group. The FCA also proposed to issue temporary guidance for borrowers with a maturing or recently matured interest-only or part-and-part mortgages who are up-to-date with payments. The FCA proposed that firms should allow these borrowers to delay repayment of the capital on their mortgage up to 31 October 2021, if they need to, providing they continue making interest payments.
In PS20/11 the FCA reports that respondents supported the proposals in CP20/13 and that it was implementing the proposed rule change for intra-group switching, and implementing the proposed temporary guidance on interest-only and part-and-part mortgages subject to some minor changes (further described in paragraph 1.30 of PS20/11).
The rule on intra-group switching comes into force on 23 October 2020. Lenders can start making use of this rule as soon as they are ready to do so. The temporary guidance on maturing interest-only and part-and-part mortgages comes into force on 31 October 2020, and applies to eligible borrowers whose loans have matured between 20 March 2020 and will be maturing until 31 October 2021. The FCA expects lenders and administrators to begin telling eligible borrowers about the option to delay capital repayment promptly, and this is discussed in paragraph 3.4 of PS20/11.