Brexit is stopping Britain's financial regulator from helping thousands of homeowners trapped on high mortgage rates, the head of the watchdog's head has claimed.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), blamed the distraction of Brexit negotiations for the regulator's failure to intervene on behalf of so-called "mortgage prisoners".

Mortgage prisoners are homeowners who, because of "affordability rules", are blocked from moving to cheaper mortgage deals on the grounds that they cannot afford to pay less than they currently are.

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Many are borrowers who took out interest-only loans prior to the financial crisis. Since then, EU law – known as the Mortgage Credit Directive – has tightened rules around mortgage lending.

Banks have used the rules, borrowers claim, to prevent them moving onto new deals at a time when new customers are enjoying record-low mortgage rates.

Speaking yesterday at a meeting of the influential Treasury committee of MPs, Mr Bailey said the EU affordability rules were "bonkers" and unfairly hit those homeowners who want to move to a new provider to get a cheaper deal.