According to reports, stricter mortgage lending criteria introduced in April 2014 have resulted in a sharp increase in a new type of property owner; the mortgage prisoner.
In fact, the BBC estimates that there may be as many as 4 million mortgage prisoners living in the UK. But what are ‘mortgage prisoners’?
A mortgage prisoner is someone who is stuck on a Standard Variable Rate (SVR) after their existing mortgage product has come to an end, because stricter lending criteria means they’re unable to shop around for a better deal.
Despite having a good payment record and no change in circumstances, home owners are struggling to access more competitive mortgage products because harsher rules mean they are unable to pass affordability tests.
Unfortunately many mortgage providers rely on automated computer assessments, so there is little flexibility to consider a mortgage application on the case’s individual merits.
What can you do if you’re a mortgage prisoner?
If you’re a mortgage prisoner, your mortgage lender might offer more flexibility if you are able to prove that prior to your new application you:
- Have always made your mortgage repayments on time
- Have not had any change in circumstances
- Are not looking to increase the size of your mortgage
If that’s the case for you, you will need to find a mortgage provider who is prepared to take on customers from other providers and willing to apply transitional arrangements and one who is prepared to undertake manual underwriting (a personal review of your case, rather than an automated computer assessment of the facts).
If you have had a change in circumstances, a mortgage lender who is prepared to carry out manual underwriting will still be your best bet in securing a mortgage – if you can prove you can afford the repayments there may be some flexibility in how much they’re prepared to lend you.
Unfortunately, if mortgage prisoners are unable to find a mortgage provider willing to lend them sufficient funds, they’re either going to have to continue with the uncertain and often inflated rates of a Standard Variable Rate (SVR), or look to downsize to a cheaper property in line with what mortgage providers are prepared to lend them under the new affordability guidelines.
If you’re a mortgage prisoner, struggling to make your mortgage repayments, your best option may be to consider selling your house. Quick Move Now, the UK’s largest independent home buyer, can offer you a secure, guaranteed cash sale in as little as 7 days. To see how much you could get for your house, fill in the free, no-obligation estimate form below.