Have You Found Yourself As A Mortgage Prisoner?

The reality is very much the case that thousands of homeowners across the UK are finding themselves as what is known as a ‘mortgage prisoner.’ This, of course, is due to the stricter criteria for lending which we’ve seen come into play over the past 18 months coupled with the fact that, going back a few years, borrowing was relatively easy for even those with questionable credit history.

What Is A Mortgage Prisoner?

The Mortgage Market Review brought with it far tighter lending criteria than was previously the case, something which was intended to prevent lenders lending to those who could potentially be unable to repay and default on repayments. Following the infamous 100% (or higher) mortgages and the high number of cases where borrowers were unable to afford repayments, the MMR brought in stricter criteria for lenders to assess affordability and finances.

As such, thousands of homeowners are finding themselves paying a mortgage at their lenders SVR (standard variable rate – that which is paid when a fixed, tracker or discount mortgage ends) because they simply cannot get approval on a new mortgage due to not meeting affordability criteria.

What is happening is that lenders are informing borrowers that they believe they couldn’t afford the repayments on a remortgage or on a new fixed rate deal, despite the fact that this would actually see repayments being cheaper than they are currently paying on the SVR.

Even in circumstances where a borrower has been with a lender years, never missed repayments and have a great credit history, if your current circumstances don’t meet their affordability criteria, it’s often a case that a remortgage or new fixed rate deal won’t be approved.

In other instances, borrowers are finding that lenders have changed the terms of their mortgage and that what they believed to be ‘portable‘ (meaning your mortgage can move house with you) is actually not.

Who Is Affected & What It Means?

It is currently believed that up to 40% of homeowners could find themselves mortgage prisoners over the coming years, unable to secure a new deal once their current fixed term or tracker period comes to an end.

In short, finding yourself as a mortgage prisoner doesn’t mean you’ll lose your house, something which many fear when they hear the term. Worst case scenario is that you’ll end up ‘stuck’ at your current lender’s SVR however this means you’ll be paying a far higher rate of interest than you could be should you be able to secure a new deal, making monthly repayments higher, often considerably.

On rare occasions, it has been known that homeowners have found themselves knocked off the property ladder due to their mortgage no longer being portable, however this is unlikely to happen so long as you double check prior to putting your house up for sale.

The stricter lending criteria currently in place effectively means that those who have a great track record are being rejected for a ‘new deal’ on the grounds of affordability. Despite never missing payments and a great credit history, the MMR means they no longer class as being a ‘safe bet’ for lending to.

Lenders are now forced to take an in-depth look at bank statements and some have been known to carefully scrutinise things such as gym memberships, childcare and even pension contributions.

What Can You Do If You’re A Mortgage Prisoner?

If you find yourself a mortgage prisoner, don’t give up! Whilst your current lender may be refusing to give you a new fixed rate deal, it’s important to know that not all lenders use the exact same criteria. What one lender looks at to assess affordability isn’t necessarily the same as others.

Whatever you do, don’t give up! We welcome you to give one of our expert mortgage brokers a call today on 0800 756 7794 who can chat through your circumstances and look for the best solution. Whilst you may feel you’re a mortgage prisoner, there’s usually options out there and as ‘whole-of-market’ brokers, we’ll find the lender whose criteria you will meet! All this for absolutely no broker fee!