Newspaper article Manchester Evening News

Hope for 'Mortgage Prisoners'

Newspaper article Manchester Evening News

Hope for 'Mortgage Prisoners'

Article excerpt

Mortgage holders who can't switch to better deals due to tighter affordability checks - despite faultless payment records - could soon find they are "unlocked" thanks to new action from watchdog the Financial Conduct Authority (FCA).

When their deals expire, these 'mortgage prisoners' don't usually have any option other than to move onto their lender's standard variable rate (SVR), which is almost always costlier. Others don't even know to look - they just take the default expensive rate.

Until the FCA action, a borrower with a five-year fixed deal in 2014 who took a lower-paying job might find they only qualified for a new SVR loan with the same bank - despite being up-to-date with payments and the new, higher, monthly amount stretching their finances far further than they would be on a cheaper deal.

Another group of prisoners are retired people or those nearing retirement.

They may be quite able to finance their loan, perhaps from savings, but are forced to pay more with an SVR, leaving them poorer.

Younger borrowers might find they no longer qualify for the best deals because they have switched from employed to selfemployed status.

Now the FCA wants changes in how lenders assess whether customers can afford loans.

To free the prisoners, it expects lenders to work on innovative tools to help customers more easily identify what mortgages they qualify for. And it will change rules which result in mortgage payers being trapped in expensive loans when they could have something less costly.

Christopher Woolard, executive director of strategy and competition at the FCA, says: "We are particularly concerned about consumers - who are commonly referred to as mortgage prisoners - who are currently unable to switch. That is why we are acting now to help remove potential barriers in our rules. These changes should make it easier for consumers to get a more affordable mortgage. …

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