Lenders have recently made a voluntary commitment to help thousands of ‘mortgage prisoners’ that are currently paying high interest rates with a potential offer to move to a better, more suitable deal.
There are up to 10,000 homeowners currently trapped in their current deal, stuck paying higher interest rates, with many of them taking out mortgages before new, stricter rules on affordability were introduced in 2014.
The Financial Conduct Authority (FCA) published an interim report into the mortgage market in May, revealing that these ‘mortgage prisoners’ were unable to transfer to a better deal when their existing mortgages switched to the more expensive standard variable rate, even if they could meet the payments. This came as a result of stricter of affordability checks or a change in circumstances after the original deal had been made.
The authority identified approximately 150,000 ‘prisoners’ and, of these, about 30,000 were with authorised mortgage lenders, while 120,000 had taken out mortgages with unregulated firms, including Northern Rock and Bradford & Bingley customers. Just 10,000 of these mortgages are with lenders that are still actively operating in the mortgage market.
It is within this 10,000 that 59 lenders have made a commitment to help them find a better deal. However, the rules set by the regulator mean they will not, in effect, have access to the whole of the mortgage market for a cheaper fixed-rate deal. Despite this, providing the consumers are keeping with mortgage repayments, the commitment organised by UK Finance means that they will receive a letter from their existing lender, detailing what similar, but cheaper, deals are available.
UK Finance director of mortgages Jackie Bennett said: “Lenders have responded to the FCA's challenge and made a voluntary commitment to help these longstanding customers.”
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