A mortgage prisoner is a person who is unable to meet strict affordability checks under the lending legislation criteria that was introduced in 2014. Despite record low interest rates, many people across the UK are genuinely struggling to get a mortgage.
A Mortgage Prisoner Is Usually Stuck
Thousands of UK borrowers are finding it harder to get a mortgage. This is due to changes in their circumstances and not meeting tougher lending rules. In 2014, the Financial Conduct Authority introduced new measures to enforce more responsible lending practices. These new rules incorporate stricter checks on income and outgoings. As a result, affordability has been reduced for many borrowers because they don’t meet the new lending criteria.
Strict Lending Criteria
Lending guidelines require borrowers to demonstrate that they would be able to afford the monthly repayments on a mortgage if interest rates were to increase. Regular outgoings are considered when a potential borrower is assessed for a mortgage to determine how much they can afford. These include: credit card debts, personal loans, car finance, school or childcare fees, maintenance payments and gym memberships .
What is a Mortgage Prisoner?
The term “mortgage prisoner” refers to borrowers who could met previous mortgage criteria but are now unable to meet stricter affordability checks following the criteria change in 2014. Even for borrowers who have paid their mortgage for years and without defaulting, it’s now a struggle to remortgage. As a result, a mortgage prisoner would be unable to get a better interest rate that would save them money or change from an interest only deal to a repayment mortgage.
What Should a Mortgage Prisoner Do?
Those who are effectively a mortgage prisoner should seek advice from an independent financial adviser as soon as possible. Although a current lender may not be able to offer a remortgage product, there are other options. There are specialist lenders that may be sympathetic to people facing these circumstances.
There are solutions that are available, but the issue needs to be tackled on a much wider basis. To do this, lenders need to ensure that current lending rules in these cases are interpreted and applied more fairly.
