Next year, mortgage lenders would be writing to “mortgage prisoners” who are trapped in high-interest-rate mortgages. They would be helping them to move onto a deal that is better than their current offering.
The mortgage lenders would send letters which are hopefully going to arrive before the year is out. These letters would outline comparative mortgage deals for customers stuck on high-interest mortgages. There are believed to be up to 10,000 house owners trapped paying high interest rates on mortgages.
What Is A Mortgage Prisoner?
Most (if not all) of these homeowners obtained mortgages before the stricter rules were introduced in 2014 which put a thorough check on the affordability. Last May, the Financial Conduct Authority (FCA) published a report highlighting how these borrowers were being trapped. According to Scott from Home House Buyers “The problem with “mortgage prisoners” is that once they had been moved to a more expensive variable interest rate when their existing mortgages ran out, they then couldn’t switch because they didn’t meet the new requirements of the lender to get a new cheaper deal.” These problems stem down to the new stricter affordability checks or sometimes to a change in circumstances that happened after the original mortgage deal was taken out.
Cheaper Mortgage Deals
According to FCA, there are around 150,000 such customers. Moreover, as many as 120,000 customers are with firms such as Northern Rock and Bradford & Bingley, which are not regulated. Only 30,000 customers are with regulated high street firms. On top of it, as many as 10,000 customers of lenders still operate in the mortgage niche. People within this group are supposed to be supported by 59 lenders, who are committed to helping them in finding a better deal.
These new rules brought in by the mortgage regulator would not bring complete relief to the customers. They will still face difficulties when searching for a cheaper fixed rate deal, as they will be blocked from searching the whole of the market.
UK Finance has organised a scheme. Through a letter everyone who is a “mortgage prisoner” would be sent details about cheaper deals, as long as they are meeting the requirements of keeping up with repayments of their mortgage commitments.
”Lenders have responded to the FCA’s challenge and made a voluntary commitment to help these longstanding customers,” said Jackie Bennett, director of mortgages for UK Finance.
UK Banks Only Do Bare Minimum
Even though these lenders have been contacting their current customers, who are in this predicament, UK finance is still likely to warrant a backlash from the FCA, as they seem to be doing only the bare minimum in response to the issue. The only big name missing from the list is TSB, which has seen its own issues with a chaotic and shambolic IT move. TSB said they are fully supporting the UK Finance scheme and will be joining the process shortly.
Also, in the FCA report they highlight that around 30% have failed to find the cheapest mortgage offers around. The FCA’s main objective is for borrowers to find out which mortgage products qualify for quicker mortgage, and also to determine these products so as to find out which one suits them best.
The UK Finance has yet to offer an answer to this problem and has advised they need further time for investigation. They believe that new technology is required to be given time to develop to aid the comparisons of prices before the FCA gets involved.
Article Submitted By Community Writer