New plans to make it easier for homeowners to remortgage or switch lenders
Some homeowners should find it easier to remortgage or reduce their mortgage term under changes confirmed by the City regulator to simplify rules and create more flexibility. The Financial Conduct Authority (FCA) said the shake-up is part of reforms to mortgage rules to help people navigate their financial lives.
The FCA is removing guidance that has 'served its purpose' to reduce the regulatory burden on firms. Under the changes, borrowers could find it easier to reduce their mortgage term, helping to lower the total cost of borrowing and reduce the risk of repayment extending into retirement, the regulator said.
It is removing a requirement for a full affordability assessment when reducing the term of a mortgage, but lenders are still expected to consider affordability where they choose to use the changes.
For example, firms must act to avoid causing foreseeable harm and must monitor and regularly review the outcomes customers are experiencing, the regulator said.
People should also find it easier to switch to a new lender to remortgage, if they wish to, helping them to access cheaper products.
Consumers could see their choice improved by allowing for simpler affordability assessments, where a proposed remortgage is on similar terms to an existing contract, but more affordable than a new deal indicated by a customer's existing lender.
The FCA expects many borrowers to continue to benefit from regulated mortgage advice.
Lenders are expected to consider what is appropriate to identify consumers who need advice or other support.
Emad Aladhal, director of retail banking at the FCA, said: 'We are helping more people navigate their financial lives by supporting those who can afford to buy a home and supporting competition in the mortgage market.
'Consumer needs have changed over recent years, and our rules are changing too.
'Today's changes support growth by simplifying some of our rules, saving consumers time and money, while ensuring they still benefit from advice, where needed.
'We want lenders to use these changes to innovate and better serve aspiring homeowners and existing borrowers.
'These reforms are another significant step in our mortgage rule review, which we're delivering quickly.
'They are supported by the strong protections we've already put in place for consumers in the mortgage market.'
The regulator said reform of the mortgage market is possible due to the continuation of high standards, such as the Consumer Duty, which requires lenders to put customers at the heart of what they do, as well as effective affordability checks and support for people in financial difficulty.
The FCA's policy statement said regulatory reforms introduced after the 2008 financial crisis have improved standards across the mortgage market, with overall mortgage arrears and repossessions remaining low by long-term standards.
The regulator said that, while changes are voluntary for firms, supporting sustainable home ownership and a competitive mortgage market is a collective responsibility.
Changes to mortgage rules were included in the FCA's letter to Prime Minister Sir Keir Starmer earlier this year, linking with the Government's aims to support economic growth.
As part of its wider mortgage rule review, the regulator has opened a public discussion on the future of the mortgage market. It is inviting feedback until September 19 2025 - full details on the FCA website here.
Many lenders have recently made changes enabling some people to potentially borrow more, following clarification from the regulator.
Paul Matthews, senior director of risk at leading financial services consultancy Broadstone, said: 'The FCA is taking significant steps to make it easier for consumers to make changes to their mortgages and get better support on their available options.
'The easing of regulation will allow lenders greater flexibility to innovate in the market.'
Charles Roe, director of mortgages at UK Finance, said: 'The FCA's reforms are a welcome step to help lenders respond more effectively to customer needs and widen access to homeownership.
'Their optional nature means that firms can apply them in line with their own risk appetites. By reducing regulatory friction and enhancing switching flexibility, the reforms will enable the mortgage sector to continue to support the Government's growth agenda, by supporting both new and existing mortgage customers.'
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Powys County Times
3 hours ago
- Powys County Times
Lenders do not owe millions compensation over car finance, Supreme Court rules
Lenders have avoided potentially having to pay compensation to millions of drivers, after the Supreme Court ruled they are not liable for hidden commission payments in car finance schemes, but some motorists may still receive payouts. The UK's highest court ruled that car dealers did not have a relationship with their customers that would require them to act 'altruistically' in the customers' interest. The decision comes after two lenders, FirstRand Bank and Close Brothers, challenged a Court of Appeal ruling which found 'secret' commission payments, paid by buyers to dealers as part of finance arrangements made before 2021, without the motorist's fully informed consent, were unlawful. The ruling in October last year found that three motorists, who all bought their cars before 2021, should receive compensation after they were not told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from the lenders for introducing business to them. On Friday, Lords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen ruled that car dealers did not have a relationship with their customers that would require them to act only in the customers' interest, and that the Court of Appeal was wrong. But they said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA). The Financial Conduct Authority (FCA) said it will confirm by Monday whether it will consult on a redress scheme, while one of the three drivers said he was 'dumbfounded' by the ruling. Handing down the judgment, Lord Reed said the car dealer 'was at all times pursuing its own commercial interest in achieving a sale of the car on profitable terms'. He continued: 'In reaching the opposite conclusion, the Court of Appeal failed to understand that the dealer has a commercial interest in the arrangement between the customer and the finance company. 'The court mistakenly treated the dealer as acting solely in the interests of the customer once the customer had chosen a car and agreed a price.' The FCA, which intervened in the case, previously said it would set out within six weeks whether it would consult on a redress scheme. But a spokesperson said after the ruling that it would confirm whether it will consult on any such scheme by 8am on Monday 'to provide clarity as quickly as possible'. Lord Reed said the Supreme Court had decided to deliver its ruling on a Friday afternoon, outside of trading hours and after the markets had closed for the weekend, to avoid the risk of 'market disorder'. The three drivers involved in the case, Marcus Johnson, Andrew Wrench and Amy Hopcraft, all used car dealers as brokers for car finance arrangements for second-hand cars worth less than £10,000 before January 2021. Only one finance option was presented to the motorists in each case, the car dealers made a profit from the sale of the car and received commission from the lender. The commission paid to dealers was affected by the interest rate on the loan. The schemes were banned by the FCA in 2021, and the three drivers took legal action individually between 2022 and 2023. After the claims reached the Court of Appeal, three senior judges ruled the lenders were liable to repay the motorists the commission because of the lack of disclosure about the payments. Lawyers for the lenders told the Supreme Court at a three-day hearing in April that the decision was an 'egregious error', while the FCA claimed the ruling went 'too far'. In their 110-page judgment, the five Supreme Court justices found that 'an offer to find the best deal is not the same as an offer to act altruistically'. They said: 'No reasonable onlooker would think that, by offering to find a suitable finance package to enable the customer to obtain the car, the dealer was thereby giving up, rather than continuing to pursue, its own commercial objective of securing a profitable sale of the car.' However, the judges upheld a claim brought by Mr Johnson under the CCA that his relationship with the finance company had been 'unfair'. Mr Johnson, then a factory supervisor, was buying his first car in 2017 and paid the £1,650.95 in commission as part of his finance agreement with FirstRand for the Suzuki he purchased. The Supreme Court ruled he should receive the commission and interest, which Mr Johnson told the PA news agency totalled 'just over £3,000'. Mr Johnson said that he was 'dumbfounded' by the ruling, which he said 'does not sit right with me'. He said: 'I am obviously happy that my case was successful, but for so many other people that were also overcharged, I just don't like the message it sends to the UK consumer.' He said the ruling 'sounds like it's fine to secretly overcharge customers for commission'. A Treasury spokesperson said it would work to 'understand the impact for both firms and consumers'. They said: 'We recognise the issues this court case has highlighted. That is why we are already taking forward significant changes to the Financial Ombudsman Service and the Consumer Credit Act. 'These reforms will deliver a more consistent and predictable regulatory environment for businesses and consumers, while ensuring that products are sold to customers fairly and clearly.' Close Brothers said it was 'considering' the judgment and 'will make any further announcements as and when appropriate'. Kavon Hussain, founder and lawyer at Consumer Rights Solicitors, which represented Ms Hopcraft and Mr Wrench, said it was 'disappointing' the Supreme Court did not fully uphold the Court of Appeal's ruling. He said: 'The Supreme Court ruling supports our view that lenders had acted unfairly in millions of car finance deals. 'This should now pave the way for the biggest compensation payout to motorists in British legal history. 'We will fight to get consumers the money they are owed by these lenders.'
BBC News
3 hours ago
- BBC News
Car finance payouts limited, but lenders aren't off the hook
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All of this means the compensation bill could still be in the Supreme Court's intervention has been eagerly awaited since October, when the Appeal Court issued a verdict in three test cases which could have triggered an avalanche of compensation each case, people who had bought cars on finance claimed they were partially unaware that the deal had involved a commission payment being made by the lender to the car dealer. They claimed that in law the commissions amounted to bribes, or secret Appeal Court judges agreed, essentially saying that commission payments made by a finance company to a dealer for arranging a car loan were illegal if the car buyer had not given his or her "informed consent".They also concluded that a car dealer had a "fiduciary duty" towards the car buyer when it came to arranging a car loan. In other words, the dealer should set his or her own interests aside, and act purely on the customer's meant that millions of car buyers could potentially claim compensation – if they could show that the dealer had not specified what commission payments they were receiving for lining up a finance deal. It was not enough for the details to be buried in small had feared that this would lead to an avalanche of claims against them – and that the same arguments could be used to challenge other kinds of consumer finance agreements as well, potentially increasing the compensation bill still the Supreme Court threw very cold water over those arguments. The President of the Court, Lord Reed, dismissed the idea that car dealers had a "single minded duty of loyalty" to their customers, and insisted they "plainly and properly" had personal interests in the finance agreements they were involved ruling clearly blocks off what could have been a very wide avenue for compensation claims. However, the court did side with one of the claimants. In the case of Marcus Johnson, a factory worker, it decided that the finance agreement was "unfair" under the terms of the Consumer Credit Act. This was because the size of the commission payment was very large, and because Mr Johnson had been misled about the relationship between the dealer and the lender. He was, they said, entitled to say this could open the doors for other cases in which the commission payments are seen to be is also a key question the Supreme Court ruling does not answer. This is what should happen in cases involving so-called Discretionary Commission Agreements (DCAs). These were finance deals in which the car dealer could set the interest rate of a loan, within a set scale. The higher the rate, the more commission they would be paid – and the customer would be unaware of the Financial Conduct Authority banned such deals in 2021. It is now considering whether to launch a redress scheme for consumers who were affected by them. If it goes ahead, millions of car buyers could still have a claim, though it is not clear how much compensation they would to Richard Barnwell, a financial services advisory partner at accountancy firm BDO, the bill could still be substantial."We believe there is still a potential for redress, for example, if discretionary commission arrangements are deemed to be an unfair relationship, redress could still be from to £5bn to £13bn or more," he analysts agree. According to Martin Lewis, who runs the MoneySavingExpert website, "the Supreme Court has certainly narrowed the number of people who will be able to reclaim car finance. I think you're probably talking the lower end of £10bn, as opposed to £40bn."That £10bn would still be a significant figure. But the finance industry appears to have avoided the potential free-for-all rush to claim compensation the earlier verdict had threatened to spark while the Treasury says it will "work with regulators and industry to understand the impact for both firms and consumers", the BBC understands that the likelihood of the government intervening with retrospective legislation to protect financial firms has now diminished law of bribery only applies to persons who owe a single-minded duty of loyalty and are therefore bound to have no personal interest in the matter that they are dealing the present case the car dealers plainly and properly have a personal interest in the dealings between the customers and the finance companies.
Powys County Times
3 hours ago
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