"Given that this guidance was published before the resurgence of the virus and the introduction of the new local alert levels and the Wales circuit breaker lockdown we recommend that the FCA should review it."
The APPG says the FCA should be "more prescriptive" about the forbearance options which should be offered by lenders to customers, arguing that it "could be a lottery as to whether customers are treated fairly".
It also wants the offer of a temporary three month payment holiday to be extended to all customers in Tier 2 and Tier 3 areas if they are suffering from financial difficulties.
The Group have also asked the regulator for an "urgent reconsideration" of the lifting of the ban on repossessions in Tier 2 and Tier 3 areas and putting a further restriction in place for a time after a local area moves back into Tier 1.
The letter also recommends that all borrowers be given the right to request a temporary switch to interest-only payments for a period of up to 12 months, without being considered in arrears.
Additionally, the APPG wants all borrowers to be able to request an extension to the term of their mortgage for a defined period without having to go through an affordability assessment.
In its letter, the APPG said: "Given that this guidance was published before the resurgence of the virus and the introduction of the new local alert levels and the Wales circuit breaker lockdown we recommend that the FCA should review it. The discretion afforded to firms around the forbearance options they offer also means that it could be a lottery as to whether customers are treated fairly.
"The FCA should change the rules for the modified affordability assessment so that any missed payments due to temporary financial difficulties caused by the coronavirus do not prevent mortgage prisoners from switching using the modified test. If lenders can’t exercise discretion in this way then any mortgage prisoner missing a payment due to the coronavirus would be trapped paying a high interest rate for the next 12 months."
Seema Malhotra MP, co-chair of the APPG on mortgage prisoners, said: "Since the FCA finalised its guidance on mortgages and the coronavirus we have seen the start of the second wave of the pandemic and the introduction of new local alert levels and lockdowns. The feedback from mortgage prisoners trapped on high SVRs and facing the income uncertainty particularly under Tier 2 and Tier 3 restrictions is very worrying. It is important that the FCA review its mortgages guidance in light of the second wave to better protect those suffering financially, to allow people in the higher alert areas to apply for payment holidays and to prevent repossessions."
