A million mortgage prisoners left out in the cold
Mortgage prisoners may be forced to wait for a rate hike before help comes, according to trade body the Association of Mortgage Intermediaries (AMI).
Mortgage prisoners are borrowers who are unable to remortgage their existing deal to a new, lower rate because of lending criteria being tightened since they took out their loan. Their mortgage might be deemed unaffordable under new lending criteria which leaves them locked into their deal, even if the rate is not competitive.
AMI warned that up to a million consumers continue to be ignored by lenders and the regulator. The organisation’s chief executive, Robert Sinclair, predicted that they may be left out in the cold until interest rates rise.
He said: “We continue to raise the plight of the mortgage prisoner with the regulator in our meetings. Its response is that we should highlight individual cases where borrowers have been locked out of remortgaging, but we don’t think this is an appropriate way of tackling the problem.
“We think this problem will only start to be resolved when the prospect of an interest rate rise becomes a reality.”
A rate rise might trigger action because in the current low interest rate environment, many mortgage prisoners stuck on Standard Variable Rates (SVR) can afford their repayments.
But Sinclair warned if rates began to rise, it could a cause a hiatus in the market as people rushed to remortgage but were unable to secure a new deal, raising the profile of the problem.
The issue of mortgage prisoners is gathering support, with the backing of MoneySavingExpert’s Martin Lewis and Citizens Advice in addition to AMI.