At the heart of this problem lies the huge change in lenders' psychology stemming from the MMR. The shift in accountability to lenders for client outcomes allied to individual interpretation of the affordabiilty rules has left a proportion of existing borrowers stranded.
The FCA showed welcome foresight in putting the transitional rules into place. Although there has been take up by some lenders, the larger ones which are wary of past regulators believe they are better off politely ignoring what to them was not a dictat but rather more of a suggestion to use the transitional arrangements.
With our European masters ordering the end of the transitional rules, the loss is probably more symbolic than something that will be missed as it has not actually had much effect.
The weakness of the transitional rules lie in the way in which our regulator expects the regulated to interpret rather than treat rules as gospel.
Even though the FCA has harrumphed about lenders doing more to help existing customers, there has been very little in the way of coercion or subsequent action.
Lenders now have even less incentive to help customers who are stuck with them. These borrowers have become captives and sadly there is no good commercial reason to stop them languishing on standard variable rates.
That might not be fair, but thanks to historically low rates it is unlikely to be too much of an issue at the moment, provided they do not wish to switch to other products. That may change when rates start to go up.
Is it fair? No it is not. But it is understandable. Tightening the affordabiilty rules was always going to produce casualties, which is why the FCA introduced the transitional rules to help ease the dilemma. The fact that the industry has chosen to ignore the opportunity to help when there is no advantage or sanction highlights both the legacy of less strenuous past underwriting and the downside of a rulebook open to interpretation.
Clients are actually in need of a more robust form of assistance from both lenders and the regulator.
Tony Salentino, director at Complete FS