The Financial Conduct Authority says there are about 47,000 mortgage prisoners in the UK – but this doesn’t mean there are no alternative options available to them
A stark warning has been issued to so-called “mortgage prisoners.” They are the people trapped in a devastating financial situation due to their mortgage. These unfortunate souls are often stuck with crippling interest rates on their home loans, making bills unmanageable and leaving them unable to switch to a new lender or product.
The majority of these mortgage prisoners fell into this trap unintentionally after the 2008 crash when their lenders became “inactive,” meaning they no longer offer new mortgage products. At the same time, most active lenders introduced additional criteria and stringent requirements.
Essentially, when the housing market crashed, they became trapped in the mortgage they were paying at the time. This is particularly concerning for those on high-interest mortgages or those who had plans to move away from their lender.
According to the Financial Conduct Authority, there are about 47,000 mortgage prisoners in the UK. However, that’s not to say there aren’t any options open to them.
It’s advisable to check with your current lender first to see if you are a mortgage prisoner and what your options could be. It may also be worthwhile checking with other lenders, particularly their eligibility requirements, in case you’re able to find a deal you can move to that would cut your mortgage bill, reports the Express.
If you are truly stuck as a mortgage prisoner, there isn’t currently help available from banking institutions or the government but this could soon change.
In March 2023, a landmark report was published by LSE, commissioned and funded by MSE and Martin Lewis, outlining costed solutions for mortgage prisoners. The Economic Secretary to the Treasury has pledged to consider these new proposals.
MSE also encouraged mortgage prisoners to seek support online, with numerous free social media groups available to help manage the physical and mental health challenges associated with being a mortgage prisoner.
Non-profit debt counselling services like National Debtline, Citizen’s Advice and StepChange can also assist in restructuring your finances to better suit your needs.
Some individuals may not even realise they’re mortgage prisoners.
The two main indicators are if you bought your home or remortgaged it before 2014 when lending regulations changed, or if you’ve been previously informed that you can’t switch to a cheaper mortgage deal.
Other signs include being trapped on a standard variable rate, some as high as 9%, which could mean you’re struggling to meet monthly payments or at risk of repossession or negative equity.
Negative equity happens when the value of your home is less than the remaining balance on your mortgage.
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