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Helping hand coming to 150,000 'Mortgage Prisoners'

Tuesday, 26th March 2019

Around 150,000 home owners classed as ‘mortgage prisoners’ will soon be able to re-mortgage at far cheaper rates following new proposals announced today by the city regulator, Financial Conduct Authority (FCA).

The Mortgage Market Review in April 2014 led to stricter qualifying criteria, mainly tougher affordability checks, for a mortgage and re-mortgage. This resulted in tens of thousands of mortgage holders being prevented from switching to cheaper lenders even though they could prove they were able to afford their current higher rate mortgages. Hence the nickname, 'mortgage prisoners'.

The new proposals will now make it much easier for those customers who are not seeking to borrow more but just to move their existing level of mortgage to a cheaper lender provided they meet the ‘new’ lending criteria.

What is the ‘new’ lending criteria?

The perspective borrower will need to prove they are still able to afford a re-mortgage suing industry set guidelines, must not have had mortgage arrears within the past few months/years and obviously have a good credit history. Someone that went insolvent (bankrupt or proposed an IVA or DRO) a few years ago may well fail. It is still up to the individual lender to accept and they all have different qualifying criteria.

Financial circumstances will also be taken into account such as incomes and affordability as well as existing unsecured debt levels on credit/store cards etc. Not everyone will qualify.

What mortgage lenders are involved?

Around 30,000 customers were with FCA authorised mortgage lenders and with the remaining 120,000 or so being sold off to unregulated firms, these include Northern Rock and Bradford & Bingley.

In November 2015 the UK government sold £13bn collection of former Northern Rock mortgages to a US private equity group.

Mike Thomas, Founder of DebtWizard.com said:

"These so called 'mortgage prisoners' have for many years been unable to take advantage of the historic low interest rates in the UK. I'm pleased to see common sense prevails and although not all will qualify there is now some light at the end of what has been desperate times for these households and with the new proposals some will save hundreds of pounds a month. All we need now is for the prime mortgage lenders to come on aboard and help those affected."

Full FCA press release here




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