Mortgage prisoners to be released from poor deals under new plans

Tens of thousands of so-called mortgage prisoners trapped in high interest rate loans, could be freed from their bonds by remortgaging to cheaper deals under new plans announced today.

The homeowners took out loans before new rules were introduced in the wake of the financial crisis.

These regulations now make it impossible to switch to cheaper deals, even for those who have never missed a repayment.

“Our focus will be on those customers who are seeking to move to a cheaper mortgage and are not borrowing more to ensure that a new mortgage is more affordable for these customers,” Financial Conduct Authority chief executive Andrew Bailey wrote in a letter to the Treasury Select Committee.

“To help these customers, we will consult on changes to our responsible lending rules, with the aim to deliver a more proportionate affordability assessment,” he added.

There are approximately 10,000 such borrowers at authorised lenders, 20,000 with companies who no longer give out loans, and 120,000 who have borrowed from companies which are not regulated by the Financial Conduct Authority.

“The key issue for the remaining customers is that their mortgages are held by a firm that does not or cannot offer the customer a new loan so internal switches are typically unavailable. In our view, the solution for such customers is therefore a switch to an active lender, with whom they may be able to get a better deal,” Bailey said.