Mortgage Prisoners In The UK
The Financial Conduct Authority (FCA) in the UK is growing more concerned about so-called “mortgage prisoners”. These are individuals who took out mortgages prior to the new affordability calculations and due to the change in regulations are unable to transfer to more competitively priced products.
Initially, in light of the introduction of new affordability calculations in 2014 there was an industrywide transitional arrangement. This effectively meant that mortgage customers looking to switch like-for-like would be able to do so without undertaking the new affordability review. Initially this was deemed acceptable for not only internal product transfers but also transfers to other mortgage providers. We then saw the introduction of the Mortgage Credit Directive in 2016 which led to a change in stance from the regulators. In essence, the transitional arrangements used when switching between different lenders were deemed no longer valid.
The FCA estimates that around 140,000 customers are affected by this inability to transfer to more competitive third-party products because they would not pass the new affordability assessment. In a perfect world, those in this situation would still be able to benefit from the relatively competitive mortgage market of the UK. However, changes in the industry have led to some mortgage providers taking a step back and a relatively benign stands towards competitive rates. This means that not only are around 140,000 mortgage customers currently locked into their existing deals but many of the rates are significantly out of sync with the market trend.
There are ongoing plans to address this problem and some mortgage customers have been transferred to more competitive products. However, it will take some time to work through the affected customers and arrange transfers.
Should you speak to your current lender about a product transfer?
There are two main options with regards to remortgaging; firstly look at transferring to another mortgage product with your existing lender. The second option is to take advantage of low introductory mortgage rates with other lenders often fixed for two-year, five year or 10 year periods.
Do YOU have a mortgage in the UK? I am here to help you get a better rate: please contact me.
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