Mortgage prisoners and financial challenges
The Coronavirus pandemic has had an unprecedented impact on the British economy. Many mortgage prisoners are finding themselves facing huge financial challenges in these difficult times.
The Covid 19 crisis has also essentially created more mortgage prisoners. Clients whose borrowing is at a high LTV, particularly 90%+, have been unable to remortgage due to products being withdrawn from the market.
A “Mortgage Prisoner” is someone who has become trapped on their current mortgage deal and is unable to remortgage or move home.
In past, many of the mortgage prisoners took out interest-only deals during the housing boom back before the 2008 financial crisis. They became trapped into their mortgage when the housing market crashed and some mortgage lenders, such as Northern Rock, collapsed resulting in the mortgage book being sold to firms that are not authorised by the Financial Conduct Authority to perform a remortgage.
Mortgage prisoner is a client who has an Interest Only mortgage, and due to either bad initial advice or a change in circumstance, is unable to repay the balance at the end of the term. This can lead to the client losing the property.
Likewise, many client’s circumstances have changed, meaning they would no longer qualify for the level of borrowing required.
Therefore, paying the SVR or Product Transfer with the current Lender have been the only options to retain the property. Many of these new deals include ERCs. If the client’s existing Lender is no longer active, even a Product Transfer may not have been available.
Another issue is a change of stance from Lenders on cladding. The Government are way behind their target with removing potentially dangerous cladding from properties, following the Grenfell fire. Nearly 1,000 leaseholders in London alone are unable to sell or remortgage their homes due to banks being unwilling to lend on them because of potential cladding issues. The G15 represents London’s 12 biggest housing associations. They found that 987 households had become so-called ‘mortgage prisoners’ in June. That means they are unable to move or remortgage because of cladding fears.
In such circumstances, clients need expert advice, from a knowledgeable mortgage broker who can consider all potential options for them.
Have you become a mortgage prisoner and looking for the best mortgage advisor in Leeds? Please contact us on 0113 2488181 to speak to one of our mortgage advisors or click here.