Is help at hand for mortgage prisoners ?
17 December 2018 | Admin
If you are a mortgage prisoner trapped repaying your mortgage at a higher rate than necessary, through no fault of your own, help could be at hand.
The Government has been called on to do more to help so-called "mortgage prisoners". Mortgage prisoners are homeowners who find themselves unable to remortgage, or find a lower interest rate, due to changes in legislation following the financial crisis.
Nicky Morgan, the Secretary for the Treasury, has asked for more to be done to help people trapped into poor mortgage deals, claiming that time is of the essence when doing so.
How did this situation arise?
Before the crash, hundreds of thousands of borrowers took out mortgages and made their monthly payments on time. But many are now unable to access a better deal because they don’t meet the strict new lending rules that were introduced in 2014.
For example, before the recession, some buyers were allowed to borrow eight times their annual salary. But with tougher affordability requirements now in place, this is no longer the case.
Unfortunately, many of these customers are now restricted to their agreed deal which could cost them thousands of pounds more than the average fixed-rate deal.
What is being done to help?
The Financial Conduct Authority (FCA) is able to help customers of active firms. And around 95% of the UK’s residential mortgage market has agreed to help these borrowers switch to a better deal.
But this doesn’t do anything for the 140,000 customers who have mortgages with "inactive lenders" who no longer issue new mortgages. This includes Bradford and Bingley and Northern Rock.
As such, Nicky Morgan has called on parliament to do more to find a solution which helps these homeowners access the best possible deal.
The Government is now said to be “exploring legislative solutions” to alleviate the issues facing thousands of mortgage prisoners.
Could Brexit help?
At present, strict European Union directives make it difficult for mortgage lenders to ignore the current affordability requirements when a homeowner is looking to move their mortgage to a new lender.
However, the UK’s departure from the EU could result in lenders being able to work outside of these mortgage rules.