Contents
Who Are Mortgage Prisoners?
Mortgage prisoners are homeowners who are unable to switch to more affordable mortgage deals. This situation often arises due to changes in financial regulations or personal financial circumstances. After the 2008 financial crisis, many lenders sold mortgage books to unregulated firms. These firms often did not allow refinancing or reduced the options available. Stricter affordability checks introduced in 2014 further compounded the issue, trapping borrowers in high-interest deals.

Why This Problem Persists
The core of the issue lies in regulatory and lender requirements. Many mortgage prisoners are with inactive lenders who do not offer new deals. They mortgage prisoners meet their monthly payments but fail new affordability assessments. As a result, they cannot switch to better deals. This situation leaves them paying interest rates much higher than current market averages. Stricter affordability assessments, implemented in 2014, prevent these borrowers from refinancing, even if they have a good payment history.
The Financial Impact on Borrowers
- High Monthly Costs: Mortgage prisoners often pay hundreds more per month compared to those on competitive deals.
- Reduced Financial Freedom: Limited funds for savings or investments.
- Increased Stress: Financial strain can lead to stress and anxiety.
Steps to Find Relief
1. Understand Your Mortgage Terms
Review your current mortgage agreement. Understand the interest rate, repayment terms and fees. This helps when exploring other options.
2. Check Your Eligibility for New Deals
The Financial Conduct Authority (FCA) introduced modified affordability assessments to help mortgage prisoners switch to better deals. Under new FCA rules, some mortgage prisoners may switch without full affordability checks. Eligibility criteria include:
- Being up-to-date with payments.
- Having a loan-to-value (LTV) ratio within acceptable limits.
- Seeking a like-for-like mortgage without additional borrowing.
Consult your lender or a mortgage broker to determine your eligibility.
3. Engage a Mortgage Broker
A broker can help identify lenders open to mortgage prisoners. Look for brokers experienced with this issue. They may find solutions that are not visible to the public, such as specialised lenders.
4. Consider Selling Your Property
If refinancing is not viable, selling the property may provide financial relief. This can include:
- Selling on the open market.
- Selling to a cash buyer for a quicker sale.
This approach can help clear existing mortgage debt and potentially provide funds for a fresh start or allow you to downsize.
5. Reach Out to Support Group
Organisations like UK Mortgage Prisoners provide advice and campaign for fair treatment. They can connect you with others in similar situations and offer guidance.
Selling to a Cash Buyer: A Practical Solution
What Is a Cash Buyer?
A cash buyer is someone who purchases a property outright without needing a mortgage. This method offers speed and simplicity, making it attractive for homeowners in financial distress.
Benefits of Selling to a Cash Buyer
- Quick Sale: Transactions complete faster than traditional sales.
- Certainty: No risk of mortgage approval, therefore fewer chances of the sale falling through due to financing issues.
- Fewer Repairs: Properties are often bought ‘as-is,’ reducing the need for repairs.
Considerations Before Selling
- Price: Cash buyers usually offer less than the market value.
- Legitimacy: Ensure the buyer has the necessary funds and a good reputation.
Selling to a cash buyer may not suit everyone, but it can provide immediate relief for those under financial pressure.
Government and Regulatory Support
FCA Measures
The Financial Conduct Authority (FCA) has introduced measures to assist mortgage prisoners, including:
- Allowing modified affordability assessments.
- Encouraging lenders to offer tailored products.
These steps aim to make it easier for eligible borrowers to switch to more affordable deals. The modified affordability checks allow borrowers to switch if:
- Payments are up-to-date.
- The switch leads to a lower interest rate.
- The borrower meets specific criteria.
Campaigns and Advocacy
Groups like UK Mortgage Prisoners lobby for more support. They push for regulatory changes and fairer treatment for affected borrowers.
Government Reviews
The government is reviewing the situation to identify further solutions. While no sweeping changes have been implemented, ongoing discussions aim to address the issue.
Tools and Resources for Mortgage Prisoners
Eligibility Checkers: Online Calculators allow mortgage prisoners to check their eligibility for new deals.
Financial Advice Services: Organisations like Citizens Advice provide free financial advice.
Specialised Mortgage Brokers: Work with experienced brokers familiar with mortgage prisoner challenges.
Key Takeaways
- Mortgage prisoners are homeowners trapped in high-interest deals due to stricter lending criteria and inactive lenders.
- Reviewing mortgage terms and consulting with brokers are essential first steps.
- Options like switching under FCA rules or selling to cash buyers can offer relief.
- Support groups and advocacy organisations provide resources and connections.
FAQs
- What is the FCA’s modified affordability check? The FCA’s rules allow borrowers to switch to a new mortgage without full affordability checks if they meet specific criteria. These include being up-to-date with payments and having a lower LTV ratio.
- Can I switch if my mortgage is with an unregulated firm? Switching may be challenging if your lender is unregulated. Consulting a broker can help identify possible solutions.
- How does selling to a cash buyer work? A cash buyer purchases your property outright without requiring a mortgage. This method offers a fast and straightforward sale but may result in a lower sale price.
- Are there government schemes for mortgage prisoners? While no dedicated schemes exist, the government is reviewing the situation. Advocacy groups are pushing for better solutions.
- How can I ensure a cash buyer is legitimate? Request proof of funds and research their reputation. Working with a solicitor can protect you from scams.
Related articles
Selling Your House to a Cash Buyer
Buy My House: 3 Advantages of Selling to a Cash Buying Company