In recent times this term has become more frequent in the Financial Services Industry, but what is a mortgage prisoner and how can one become free.
What is a Mortgage Prisoner?
According to the FCA Mortgage prisoners are those unable to re-mortgage or switch to a cheaper mortgage rate due to changes in legislation following the financial crash.
It is estimated that since the changes to borrowing brought about by the recommendations from the PRA to place a lending cap, some 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal.
This has not just affected homeowners who were with Northern Rock, but also homeowners who were with Sub Prime lenders and had their mortgage fall under Securitization – the previous mortgage company selling off their mortgage client bank to another mortgage lender.
What is the answer?
As of January 2019, the FCA revealed plans to relax affordability rules and allow greater flexibility based upon the homeowners ability to afford the monthly repayments. However this would only apply to those re-mortgaging on a pound for pound basis. If homeowners were looking to borrow more money, they would need to re-mortgage and lenders who could help are making their presence known.
Building Societies and specialist lenders without a High Street presence and do not subscribe to the PRA cap on lending have been able meet the demands, but sometimes at a price, such as higher interest rates or higher fees.
If debt consolidating, homeowners need to think carefully before securing other debts against their home. Their home may be repossessed if you do not keep up repayments on your mortgage.
As always seek professional advice before taking any steps.