It is believed that thousands of homeowners in the UK could be trapped in poor mortgage deals due to changes to the affordability rules brought in during the last financial crisis.
Often referred to as mortgage prisoners, these homeowners have found, that despite generally keeping up with repayments, they are no longer eligible for many mortgage products due to the tougher rules enforced in 2008.
By being trapped in older mortgage schemes many individuals face paying considerably more over the life of the loan.
Last year the regulator the Financial Conduct Authority (FCA) did finally announce changes to the affordability tests to help customers who meet certain criteria and want to remortgage.
However, despite this MoneySavingExpert.com has found that lenders are generally uninterested in helping ‘mortgage prisoners’ switch via the new checks provided by the FCA.
Since then, in July this year, the FCA has proposed a further rule change for customers with ‘closed book’ mortgages, where their lender no longer lends to new customers.
Under the new rules, these customers are allowed to switch to a mortgage deal with a firm that is part of the same financial group as their current lender, without undergoing the usual rigorous affordability tests. However, as with the previous changes, the FCA can’t force lenders to apply the new rules.
Those people who find themselves stuck in a costly mortgage deal should consider what options are available to them, as it could significantly reduce their outgoings and allow them to redirect their income into investments or their pension.