The Financial Conduct Authority (FCA) has been reported to estimate more than a quarter of a million homeowners are trapped on mortgage deals because they don't pass current strict affordability tests or their administrators have become inactive.

Trapped

‘Mortgage prisoners’ often have interest rates as high as 8%, significantly above the current market rate. The majority took out a mortgage before 2008 at a time when lending rules were far more relaxed. As a result, many ‘mortgage prisoners’ are no longer able to keep up with repayments. Campaigners are calling again for government action to free the prisoners from unaffordable deals.

A way out?

Despite the precarious situation faced by many, there can be options to escape such costly deals. Given the complicated nature of some of these arrangements, the best way to see if you can switch is to get advice from an expert. It is possible you might be able to switch because revised provisions now allow lenders to conduct a ‘modified affordability assessment.’ Lenders can now waive some of the strict checks but only if they choose to.

Stay but switch

Another option that might be available to some ‘mortgage prisoners’ is to switch to a different deal with the same lender. Similarly, if your lender is part of a wider group, you might be able to find a new deal with an active lender in that group. Let’s consider your options together.

Essentially Mortgages Q2 2023