What Is A Mortgage Prisoner?
Who are mortgage prisoners? 2021 New Advice and Information
Mortgage prisoners are people who purchased a house prior to the 2008 financial crash on a competitive mortgage, but whose homes then plunged in value following the house price crash. Due to stricter affordability criteria, they were then unable to remortgage to a cheaper loan at the end of their term, instead being forced onto their lender’s much higher standard variable rate (SVR).
Economic Secretary to the Treasury, John Glen, has struck down proposed amendments to the Financial Services Bill, which campaigners say could have potentially freed hundreds of thousands of ‘mortgage prisoners’.
Skipton, Harrogate and Yorkshire Free Initial Mortgage Advice – Independent Financial Advisor
The proposed measures
If the proposals had been accepted, clauses 24, 25 and 26 of the Act would have been amended to:
- extend the FCA’s regulation of the mortgage market;
- cap the standard variable rate (SVR) payable by borrowers unable to switch to a different lender;
- require lenders to seek the borrower’s written permission before transferring their loan.
However, Mr Glen stated that the measures risked “a number of unintended consequences and would be disproportionate to support a small number of borrowers.”
Campaigners react
The news has been met with consternation by politicians, including Seema Malhotra MP, who chairs the All-Party Parliamentary Group on mortgage prisoners. She said, “Supporting these amendments provides immediate help to mortgage prisoners, who have suffered far too long and are now hit harder by the pandemic.”
Her words were echoed by Kevin Hollinrake MP, who argued that an SVR cap would “have a transformational effect” for tens of thousands of mortgage prisoners who cannot find relief in existing measures.
Struggling with your mortgage?
If you are currently having difficulties switching to a more competitive mortgage, speak to us. We can review your finances and guide you through your available options.
What questions or concerns do you have about your mortgage? Don’t hesitate to contact me. I offer no-obligation, no charge for initial Zoom consultations for residents in Skipton, Harrogate and West Yorkshire.
Fancy a quick chat instead? Call FREE on 08000 141948.
Independent Mortage Broker and Advisor West Yorkshire and UK
- Contact Darren on ccc or send a message via the Contact Form
- Use our handy Mortgage Calculator
- What Is A Credit Score For A Mortgage?
- COVID Mortgage Help and Repayment Holiday information
- Independent Mortgage Advice Skipton Harrogate and West Yorkshire
First mortgage prisoners Freed under new affordability rules
Mortgage prisoners who have been stuck overpaying for years are starting to escape to much cheaper deals thanks to new affordability rules, MoneySavingExpert.com can reveal – and one of the first homeowners to do so has told us he’s saving almost £500/month as a result – published 2020 by MoneySavingExpert
Mortgage prisoners are those who are unable to get cheaper deals with other lenders because they don’t meet strict borrowing criteria, even though they’d often pay less if they switched. Last year, regulator the Financial Conduct Authority (FCA) introduced rules allowing lenders to use ‘modified affordability assessments’ for mortgage prisoners who meet certain criteria – something MSE has been instrumental in campaigning for.
Four lenders have now adopted these modified assessments, and the first – West Brom Building Society – has revealed it’s now completed transfers for “a handful” of mortgage prisoners. We’re working on a new mortgage prisoners guide – in the meantime, for full help on getting a new mortgage.
I’m a mortgage prisoner – what can I do?
Whether you can get help now depends on what type of mortgage prisoner you are, and sadly for most there’s currently no help available. For full info on the problems facing mortgage prisoners, what MSE has done on the issue and possible solutions, see our Only the Government can release the 250,000 mortgage prisoners it’s failed MSE News story.
Overall there are three options available:
- Switching to a new deal with a new lender via a modified affordability assessment. This is technically open to all mortgage prisoners but in reality is most likely to help those with ‘inactive lenders’ (ie, those not currently offering new mortgages). Here you apply for a new deal with a new lender that’ll use a modified affordability assessment.To get an indication of whether or not you’re likely to pass a modified assessment, you can try out the Money and Pensions Service mortgage prisoner eligibility tool.Beyond this, it’s worth speaking to a broker who specialises in helping mortgage prisoners, who’ll look at your situation and give realistic advice on how likely a lender might be to use the modified affordability assessment for you. As long as you don’t pay a fee upfront, you have little to lose – just a few minutes of your time.
- Switching to a new mortgage with your current lender. This is where you switch to another cheaper deal but take on no additional borrowing and you aren’t looking to move house – called a ‘product transfer’.It’s only available if your mortgage currently is with an ‘active lender’ – ie, one offering new mortgages. The other caveat is that it has to be a like-for-like mortgage, ie, no extra borrowing, a two-year minimum term and a minimum outstanding amount of £10,000.If you’re unsure where to start, speak to a broker who will advise you on your individual circumstances.
- A product transfer with a different lender in the same financial group. This is where you switch to another deal with a different lender that is part of the same financial group as your current provider.
Frustratingly, there is no simple way for you to check if your lender is part of a wider group, though again a mortgage broker may be able to help here.
