Rishi Sunak grilled on support for ‘mortgage prisoners’
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Mortgage prisoners are those who are unable to leave their current lenders due to circumstances out of their control. This may include a lender becoming inactive, or unable to authorise new products as a result of tougher borrowing criteria in recent years. The problem came to a particular head following the financial crisis of 2008, where thousands of people became trapped on deals.
But this is not simply an inconvenience, and instead many of these mortgage prisoners have been forced to meet significantly higher rates, creating a financial burden.
Now, it is thought there could actually be more mortgage prisoners than originally perceived.
The Financial Conduct Authority (FCA) has announced it will be undertaking a review into the matter after former figures resulted in a “low estimate” of the number of people who have mortgages with an inactive firm and who are unable to switch.
At present, there are thought to be some 250,000 mortgage prisoners right across the UK.
Mortgage prisoners hope as review launched on expensive rates (Image: Getty)
The FCA added: “We expect that the change in economic conditions, more recent data and updated assumptions are likely to lead to an increase in our estimated number of mortgage prisoners.”
The FCA will be looking at the impact of affordability rules as a key part of its review.
Last year, mortgage prisoners were given a glimmer of hope as less stringent rules were given to some to ease the financial burden.
The FCA will therefore look at how companies have implemented these rules, and their effectiveness.
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It will assess whether there are any remaining barriers preventing borrowers from making a switch from the products they have held with inactive lenders.
It is thought the review will last until October, with a thorough analysis of the situation to be undertaken.
Stakeholder engagement is expected to take place in July and August.
Then, the outcome is likely to be presented to Parliament by the end of November, with findings outlined.
Mortgage: Affordability across the UK (Image: EXPRESS)
The Government and the Financial Conduct Authority recently released an official statement on the matter.
They pledged continual commitment to seeking additional options for borrowers stuck with inactive firms who are not currently able to secure a deal with a new lender.
The statement continued: “The Government and the signatories from industry, with the necessary input and support from the regulators, commit to working together to look for practical and proportionate solutions to help as many affected borrowers as possible switch to an active lender, should this be the customer’s wish.”
This could include a number of steps, it was explained.
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For example, Britons could take advantage of the Modified Affordability Assessment which offers flexibility concerning the underwriting process.
There are also other options, the Government states, to help “reduce the barriers” which currently prevent borrowers from making a switch.
In efforts to help those impacted in the meantime, the statement also pointed individuals towards guidance on their circumstances.
This can be gained from the Money Helper website, the official service backed by the Government to offer financial assistance on a wide range of issues.