Help for Mortgage Prisoners
Mortgage Prisoners may finally be able to get some help. The Financial Conduct Authority (FCA) announced last year that they were going to look into concerns regarding Mortgage Prisoners being stuck on mortgage deals from pre 2014. As a result they have modified some of their rules to allow mortgage lenders to offer Mortgage Prisoners the option of switching onto a better and cheaper mortgage.
These new measures have now been announced and we are delighted to be one of the FCA’s approved mortgage brokers allowed to help Mortgage Prisoners.
More information can be found at Money Advice Service – Help for Mortgage Prisoners and FCA – Understanding Mortgage Prisoners
Who are Mortgage Prisoners?
In 2014, following the Mortgage Market Review, new affordability assessment rules were put in place by the FCA. Mortgage lenders have to follow these new rules before agreeing a mortgage for new borrowers.
This means that some homeowners who took out a mortgage before 2014 have since found it hard to switch to a better deal due to not meeting these new affordability rules.
Mortgage Prisoners are these homeowners who are trapped in an expensive mortgage deal and are unable to change to a cheaper deal because they don’t meet this strict new borrowing criteria – even though they’d often be paying less if they could switch lender.
As a result, the FCA have modified their rules, allowing lenders to use a different affordability assessment for Mortgage Prisoners, to help those who are stuck in an expensive mortgage move to a more affordable one.
What changes have come into effect?
The FCA have introduced changes to how mortgage lenders can assess affordability in certain circumstances, which may help Mortgage Prisoners switch to a cheaper mortgage deal. These new rules look at your mortgage payment history, rather than using the current affordability tests that are in place.
Lenders can now use a modified affordability assessment meaning they can choose not to ask for your income and expenses details, or they can apply a stress test.
Mortgage lenders can carry out this modified affordability assessment if you:
- have a residential mortgage on your home
- are up to date with your mortgage payments and have been for the last 12 months
- do not want to borrow more – other than to pay for any fees associated with the mortgage
- are not looking to move home
Lenders can use these rules to offer you a new mortgage as long as it will be cheaper than your existing mortgage deal.
Mortgage lenders do not have to use the new modified affordability assessment or stress tests available. They may choose to help Mortgage Prisoners by making other changes to the way they assess eligibility.
Each lender will have their own policy on Mortgage Prisoners and how they assess eligibility.
Are you eligible under the new Mortgage Prisoner rules?
Lenders will all use their own criteria to decide whether they will accept an application, which differs from lender to lender. Things that may be included in their decision are:
- Minimum of 5 years remaining on the mortgage
- Remaining mortgage of at least £50,000
- Minimum property value of £60,000
- Minimum of 15% equity available in the property (the difference between how much you owe on your mortgage and the value of the property)
- The mortgage remaining as your current residential property (not available for home movers or for buy-to-let)
- No changes to the borrowers currently named on the mortgage (no borrowers added or taken off the mortgage)
- No missed mortgage payments in the last 12 months. This does not include payment deferrals agreed with the lender and taken due to the coronavirus outbreak.
- Must have received a letter from your current mortgage provider confirming you are a Mortgage Prisoner
How do I get help and what should I do next?
We are here to help you. We have been approved by the FCA to offer Mortgage Prisoners advice, and can assess the whole of the market for a solution that best suits your situation and requirement.
Contact us for a free, no obligation chat, to see if you are eligible and to discuss the options available to you
Speak to an Expert
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
There may be a fee for arranging a mortgage however the precise amount will depend on your circumstances. Typically the fee is £395.