Mortgage Prisoners

In early 2020 the Financial Conduct Authority (FCA) became concerned for a sector of homeowners whom they described as mortgage prisoners.  These are homeowners with mortgages which in the main date back to before the 2008 global financial crisis, who find themselves trapped in a current high interest variable rate mortgage who cannot change to a new lower interest rate because their lender is inactive or not authorised for mortgage lending, and who can’t remortgage to a new mortgage lender because their circumstances prevent them from passing a new lender’s affordability test.

In their findings the FCA found that:

  • Around 250,000 people were in closed mortgage books or have mortgages owned by firms that are not regulated
  • Of these, around 170,000 of borrowers were up-to-date with payments and would be eligible to switch under the FCA’s new rules

The FCA therefore introduced rules allowing lenders to use a different and more proportionate affordability assessment for customers who meet certain criteria, including being up-to-date with payments under their existing mortgage and not looking to move house, or borrow more (except to finance certain fees).

This investigation followed and earlier investigation in 2018 when the FCA identified a sector of homeowners, numbering around 1.67 million, caught in a different mortgage trap.  These were homeowners who had either a part or full Interest Only mortgage, many of which were soon coming to and end with no means of repayment.  The problem facing these borrowers is that with retirement not very far away, switching to a Repayment mortgage is simply not affordable due to the severe increase in monthly repayments.  Consequently, the FCA warned that many homeowners could ultimately lose their homes as lenders are forced to take possession of properties in order to settle the mortgage.

We are committed to helping mortgage prisoners and homeowners with Interest Only mortgages with no means of repayment and we are proud to be listed on the Money and Pension Service webpage as an experienced firm committed and equipped to do so.  We would be please to help you with your Mortgage enquiry by clicking button below.

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