This is a desperate cry we often hear. And as a mortgage brokerage, we often feel helpless. Who are these mortgage prisoners and why should we be able to help them?
A ‘mortgage prisoner’ is a borrower who is unable to switch to a new mortgage, despite being up to date with their repayments.
How do borrowers become mortgage prisoners?
An example would be a borrower that took out a mortgage prior to the ‘financial crisis’ of 2007/8, maybe on a ‘self-certification’ of income basis i.e. no income proof provided (yes, lenders did have these schemes!).
When the regulator later tightened the lending rules, the customers that could not meet the new, more stringent proof of income required, consequently become ‘stuck’. Their lender is no longer looking to attract new business, and these borrowers are left paying higher rates than those typically available now.
But, every month, they are still paying.
Mortgage prisoners may take steps to help their situation. An increase in income or move to employment is one route. Overpaying on an existing mortgage will increase equity and may qualify them for better rates. Or downsizing to a cheaper property is another option (but not a great option if you like where you live!).
There is no easy answer and indeed, the FCA has attempted to resolve this by suggesting that these borrowers should be allowed to switch to a better rate with a new lender, bypassing the standard affordability checks, as long as amongst other things, the borrower isn’t looking to increase their borrowing, and are up to date with their payments.
As a broker dealing with both ‘high street’ and ‘specialist’ lenders, we pride ourselves on offering the best possible advice. When we’re talking in terms of mortgage prisoners, we can’t always offer the answer our clients want, but we always give them the options available to them. Because when it comes to mortgage advice – we do take prisoners.
Call 0844 69 333 60 to speak to the Mortgage Search Go team today.
*Your home may be at risk if you do not keep up payments secured on it.