A mortgage prisoner is someone who finds themselves trapped in their current mortgage deal, unable to remortgage due to a change in the way that lenders assess affordability or due to a change in equity.
Am I a mortgage prisoner or can I get a standard remortgage?
The main reason as to whether someone is classified as a mortgage prisoner or not is down to what they are able to borrow based on their level of income.
Many customers mistakenly think that they are mortgage prisoners when, in fact, they would qualify for a standard remortgage. Those who aren’t sure should speak to their mortgage broker to get expert advice.
Criteria for mortgage prisoners to change their mortgage
In order for mortgage prisoners to be eligible to move onto a cheaper mortgage, the FCA have declared that customers will need to meet certain criteria. The main criteria are that they need to be up-to-date with their mortgage payments and not looking to borrow more money or move home.
However, with a standard remortgage, borrowers have the option to borrow extra and are less restricted in terms of lenders who will allow them to change their mortgage..
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:
‘Responsible lending is hugely important, and unaffordable borrowing is a cause of significant harm. Mortgage prisoners are often stuck on more expensive mortgages. We are removing barriers to switching in our rules and we would like to see firms make changes to their own processes quickly in order that customers can benefit as soon as possible.
‘We are also taking steps to help those who have mortgages with inactive lenders or unregulated entities to ensure that they are aware that they may now be able to switch and save money.’
The FCA wants customers to benefit from these changes quickly. As such, the new rules are coming into force immediately, though it may take some time for lenders to fully embrace the change. The FCA has been working closely with firms to help them get ready.
The change also means that customers who are currently with inactive lenders or unregulated firms who are not authorised for mortgage lending will be contacted and told that they may be able to switch to a different lender.
If you want to discuss your mortgage needs, please give our expert team at Dan The Mortgage Man a call or click through to ask him a question.