Mortgage prisoners are predominantly those borrowers who took out a mortgage before the financial crisis but are now blocked from switching to better rates due to changes in lending practices.
There are now an estimated 200,000 homeowners that are trapped on high interest-rate loans with unregulated or inactive firms, and are unable to switch to a cheaper deal.
Mortgage prisoners are often told by lenders that they will be unable to afford a new deal under current lending rules despite a new product offering cheaper monthly payments than their existing one.
This can be even more frustrating for those who are trapped if they have continually paid off their high monthly bills and not let their account fall into arrears. However, there may be some good news for mortgage prisoners.
So, what’s being done to help those who are trapped on high interest-rate mortgages?
An all parliamentary group was launched in May to rally support for mortgage prisoners trapped by changes to lending rules and government loan selling. The group consists of MPs from all political parties and will give support in an effort to create tangible change for people who are trapped by their mortgage.
This issue prompted MP Charlie Elphicke to present a motion in the House of Commons to force lenders to treat such borrowers as “grandfathered” as a first step towards freeing the UKs mortgage prisoners.
This exemption would allow mortgage prisoners to switch lenders without meeting the affordability assessment brought in by new regulations. The mortgage would also be permitted without any regulatory penalty for the lender.
It’s not only MPs that have acknowledged that change is needed though. The FCA stated earlier this year that it is considering a change to affordability checks, which could allow people to switch to deals that are easier to pay.
So, if any of your friends and family are some of the 200,000 mortgage prisoners in the UK there could be some positive changes on the horizon with the backing of MPs and the FCA and we will continue to keep you updated.
If you or your loved ones would like to talk through your options, contact one of our advisers today.