In April this year we published an article about the Mortgages Market Study that included a summary of the consultation paper aimed at updating the responsible lending rules to modify the affordability assessment for some customers. The article can be read here.

The proposals are to modify the affordability assessment where the customer:

• has a current mortgage;
• is up-to-date with the mortgage payments;
• does not want to borrow more, other than to finance any relevant product fee or arrangement fee for that mortgage;
• is looking to switch to a new mortgage deal on the current property.

A lender must not enter into a new contract unless they can demonstrate that the new mortgage is more affordable than the last one. 

The current rules, introduced in the Mortgage Market Review, mean that a sale must include an affordability assessment unless it is a product switch with the existing lender and there is no additional borrowing. 

The new rules above will mean that a modified affordability assessment can be carried out when switching lenders – remember it will still be the responsibility of the lender to assess affordability. 

The FCA has set up an implementation group of trade associations to:

• enable market-readiness for using proposed responsible lending changes;
• promote the availability of switching options for certain consumers.

One of the outcomes from the first meeting is that the FCA confirmed that the amended affordability assessment can be used where the new mortgage is to consolidate first charge and second charge mortgages.

Also discussed was whether it was clear how ‘more affordable’ would be assessed for new mortgage products with a discount variable rate. 

The FCA intends to publish the full policy statement in late 2019 that will hopefully answer the point above.