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Mortgage prisoners are homeowners who are up to date with their current mortgage payments, but are unable to switch to a better deal because they don’t meet the strict affordability rules that were introduced after the 2008 financial crash. This is despite the mortgage payments often working out less if they were able to switch, meaning they are left trapped with their existing mortgage, paying more money than they need to.
Mortgage prisoners tend to be customers who are held in closed mortgage books with inactive lenders (i.e. those not currently offering new mortgages) or have mortgages owned by unregulated firms.
In October 2019, the Financial Conduct Authority (FCA) introduced new Modified Affordability Assessment rules so lenders, like us, could give mortgage prisoners a better chance at switching to a cheaper deal.
Under the new rules, lenders can choose not to apply certain affordability criteria provided they can demonstrate that the new mortgage is at least more affordable than the customer’s current deal.
Specific rules that can be disapplied include:
The Society will continue to apply other areas of lending policy.
Please note, customers must meet certain criteria in order to be eligible for the Modified Affordability Assessment rules.
We can offer the modified affordability assessment as part of a new application process, provided you are:
The Society will continue to apply other areas of lending policy.
As a responsible lender, if you do qualify for one of our products that support our modified affordability assessment, it is important that you consider the benefits of maintaining the mortgage payments that you currently pay where the new mortgage payment is lower as it would reduce the length of your mortgage and reduce the amount of interest you would pay, therefore reducing the total cost of your mortgage.
You can find out more information about support for mortgage prisoners and check if you are eligible on the MoneyHelper website.
The name shown has been changed, but the case study is an example of a real customer experience.
Martin took out an interest only mortgage with Northern Rock in 2001. When the company collapsed, his mortgage was then sold to a firm called Cerberus. Unfortunately from then on he struggled to get another mortgage, largely because his and his wife’s joint income was too low to pass some affordability checks – even though the mortgages were cheaper than the one he had at the time.
When Martin found out about our plans to help mortgage prisoners, he applied directly. We helped Martin cut his interest rate meaning his monthly payments were halved from £886 to just £401 a month – a huge saving of £485 a month.
If you believe you are a mortgage prisoner and would like to request a call with one of our mortgage advisers to discuss your options, please fill out the form below:
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