Lenders to help those classed as 'mortgage prisoners'

The Financial Conduct Authority recently issued its statement around those it considers to be a ‘mortgage prisoner’.

It is estimated that around 140,000 people with mortgages are currently classed as mortgage prisoners (although some have quoted this to be as high as 500,000).  This means that the customer could be with a lender who is no longer active, or a lender who has ‘bought’ a number of customers from other lenders but who does not offer additional mortgage products once the customers current incentive (fixed) rate period comes to an end.  So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than other available incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered, or new and stricter criteria no longer enables them to change lender. 

The regulator is seeking a way forward.  As such, one area of the statement confirms that mortgage lenders can choose to carry out a modified affordability assessment where the consumer:

– has a current mortgage

– is up to date with their mortgage payments

– does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage

– is looking to switch to a new mortgage deal on their current property

In short, this means that there will be minimal and relaxed affordability checks and the lender must confirm that although this may result in a better rate for the customer, there may be potential risks as this is different from the normal affordability checks and assessments carried out.

Great news for those stuck with historic lenders on high rates.  But will only work if all lenders are encouraged to offer this option as it’s not mandatory.  As this can be quite complex, and only certain lenders will offer this assistance, speak to your local independent mortgage brokerage to find out more and seek professional guidance.

A large portion of the UK adult population has experienced credit problems..

The festive period is traditionally a time for giving, but for some people - especially those with a family to support - it can prove to be a difficult one to successfully manage. It is a season where we see more people, from all walks of life, seeking some form of supplementary borrowing, a factor which can generate additional monetary worries and financial stress, perhaps even leading to adverse circumstances down the line.

On a positive, more forums and sources of advice/information are readily available for people to discuss topics which may have previously been considered taboo and difficult to address. Although money matters and financial education are areas where there is certainly still room for plenty of improvement.

One recent lender issued a study to brokers on the world of adverse credit to encourage greater understanding and more open discussion around this subject matter. After all, this is an area which is not going away anytime soon. According to the lenders research, a large portion of the UK adult population has experienced some form of adverse credit. 15% of all participants surveyed reported that they had previously missed payments on credit commitments; had CCJs, defaults, secured or unsecured arrears registered on their credit file; or had entered a debt management plan (DMP) in the last three years.

The research outlined that adverse credit is most common amongst people who are the prime age to be homebuyers and remortgagers. The majority of people who experienced adverse credit in the last three years are said to be aged between 35-44 (43%). This compares to 33% who are aged between 18-34, and 23% who are 55+. It’s also important to point out that it’s not just the less affluent proportion of society who pick up adverse credit on their record. The report added that 61% of the adults who have experienced adverse credit in the last three years and are planning to buy a property in the next 12 months are associated with a higher income.

There are plenty of specialist lenders who will consider those who have had all types of credit issues, subject to terms and conditions, and rates are probably a lot lower than you would think.  As always, seek professional advice from the specialists.

Complex deals are considered depending on the clients scenario

Actually placing a mortgage with a lender is not normally difficult. The hardest part, in the recent climate, is getting the mortgage through to completion!

However, a number of lenders are happy to think outside the box and take a manual approach to lending.  One recent example was with the Harpenden Building Society who helped complete a £1 million interest only deal on a new build flat for a client in their 50’s.

The transaction was for a very upscale 19th floor new build property situated on the South Bank of the River Thames in London. It had a valuation of circa £2 million with some units in the development having restrictions to borrowers over 55’s and was above a commercial property.

As this was also over a twenty year term, this took the clients age in to retirement.  However, as the property was to be let out, the building society took this into consideration, along with their residential property and allowed the deal to proceed.  This was on the basis there was enough equity in the properties to repay the lenders loan if they needed to.

This example highlights the value attached to many building society lending propositions, in terms of their flexibility and approach to more criteria-based lending. 

But as with all funders, try not to give lenders an excuse to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments, and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you. Lenders can re-credit search/credit score you right throughout the whole mortgage process.

Finally, we are seeing general processing delays across the market.  Some lenders are up to ten working days behind on processing and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so who knows how customers are faring!  So, speak to your local (and long established) independent and whole of market brokerage and let them take the stress away from you.

Your mortgage broker should 'get to know you'...

Arranging a mortgage can take time.  But actually, the process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same.  On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.


The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process.