There are 30,000 mortgage prisoners that are trapped in pricey deals according to the Financial Conduct Authority (FCA). The FCA has called for more support for these borrowers from their lenders.
Affordability tests carried out by lenders have trapped mortgage prisoners in expensive deals despite the fact that they have never missed a mortgage payment.
Stricter mortgage rules that were introduced in 2014 have in part contributed to this situation as many mortgage prisoners took out interest only loans that were put in to place prior to the financial crisis.
One way of tackling the problem would be to allow borrowers to switch to a cheaper product from their current lender without being fully assessed under the new requirements as suggested by the FCA.
Some lenders may not be able to offer this as they no longer offer new products, Northern Rock which is now known as Landmark Mortgages is one example of this.
David Hollingworth of L&C shines a light on these forgotten borrowers:
"Those that took a mortgage when criteria were more forgiving may have found the door to many lenders is closed, simply because the tighter criteria in the market doesn’t support their circumstances any longer," he said.
"This leaves borrowers more vulnerable to rate rises in the future, if their only choice appears to be a high standard variable rate, despite never having missed a payment."
The FCA is emphasising that it must be made easier for borrowers to shop around for rates, with 30% of customers currently overpaying.
The mortgage market has been assessed by the FCA and the results have indicated that consumers are mostly treated fairly and are engaged.
Homeowners should however be provided with more information than they are currently according to the watchdog.
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Mortgage prisoners could be handed lifeline as three in 10 borrowers could have found cheaper deal