Help for mortgage prisoners

Are you a homeowner who’s been told you can’t switch to a cheaper mortgage deal, even though you’re up to date with your mortgage repayments?

Then you could be a ‘mortgage prisoner’.

When you take out a new mortgage, lenders check your income and expenses to see if you can afford the mortgage. These affordability assessments were made much stricter in 2014.

This means that even though you passed the affordability test when you first got a mortgage, you might not pass the test now.  

This has left some homeowners trapped on expensive mortgages without the option of switching to a better deal.

But there is support available. The Financial Conduct Authority (FCA)Opens in a new window has adjusted the rules which could help some mortgage prisoners.  

You’re a mortgage prisoner if you:  

• bought or remortgaged your home before 2014, and

• received a ‘mortgage prisoner’ letter from your provider before January 2020.  
  

If you were sent a ‘mortgage prisoner’ letter from your provider, you might be able to switch to a cheaper mortgage for your current home.  

The FCA introduced new rules in October 2019 to let lenders look at your mortgage payment history instead of your income and monthly spending to see if you afford the repayments.

This means they can use a ‘modified affordability assessment’ where they skip some of the stricter checks.

But this is only if the lender chooses to do so.

There’s no guarantee you’ll get a new or cheaper mortgage deal – as this will depend on your individual circumstances. 

It also doesn't apply if you:

• want to move and take out a new mortgage on a new property

• have a buy-to-let mortgage, or

• rent out your property using a residential mortgage with ‘consent-to-let’.

Unless you’ve missed a payment in the last year, you can usually apply to switch if you have received a mortgage prisoner letter.

The criteria for switching varies between lenders so always ask if your situation qualifies.

This can include:

• Your home is worth at least £60,000. 

• You have a residential mortgage over £50,000. 

• You have at least 5 years remaining on your mortgage.

• The loan to value (LTV) is no more than 85% (this is the amount left on your mortgage compared to the value of your home).

• You don’t want to make any changes, like adding or removing a borrower. 

If you’re a mortgage prisoner with an interest-only mortgage, you can still apply to switch. 

You can also ask to change part or all your mortgage to repayment. You’d pay more each month, but you’d start to clear more than just the interest.  

If you still want interest-only, most lenders will expect you to have a plan to clear the outstanding mortgage at the end of the term – and you might be asked for proof before you’re accepted.    

Find out more in our guide, Ways of repaying your interest-only mortgage.

If you’re eligible to apply, you can either:

1. Ask to switch to a better deal with your current lender.
2. Switch to a new lender that can offer you a modified affordability assessment.
3. Convert all or part of your mortgage from interest-only to repayment.
4. Consider a retirement interest-only mortgage or equity release if you’re over 55. Read our guide on equity release.

If your current provider no longer offers mortgage products to new customers, you have a ‘closed book’ mortgage. 

If you’re in this situation, you could try and switch to a lender in the same financial group as your current provider.

You can get advice from a broker or debt helpline to find out which lenders are offering different switching options.

Whatever your circumstances, there’s help available for you. 

To speak to a mortgage adviser for free, visit StepChangeOpens in a new window online or call 0808 1686 719

They can:

• understand your situation

• research the mortgage market for you

• give debt advice, and

• guide you through the entire process. 

They’re also regulated to give debt advice so can help resolve any money problems you may have too.

Speaking to a regulated mortgage broker can make it easier to find and apply to a new lender. 
 
You should be told about any fees before signing up, such as a flat rate, hourly charge or percentage of the amount you borrow. 

Download a list of regulated mortgage advisersOpens in a new window  in your area to discuss your options.