There once was a time when mortgages were relatively easy to obtain. All you had to do was apply for the mortgage in question, pay a small deposit and move into your dream home.
In some cases, a deposit wasn’t even required, thanks to 100% mortgages which involved lending borrowers the full amount necessary for their property purchase.
When the financial crisis hit in 2008, lenders across the UK began to tighten their criteria, making it difficult for borrowers old and new to secure the loans they need. Further rules introduced under the 2014 Mortgage Market Review and 2016 EU Mortgage Credit Directive initiated even stricter affordability checks, making it tougher than ever to obtain a home loan.
What do these checks assess?
These checks assess everything from annual income to credit history and were designed to ensure homeowners can afford to repay their loans. Not only do borrowers need to prove they can afford the mortgage at the time of their application, they also need to show they can afford repayments if interest rates were to rise.
What is a mortgage prisoner?
Although tough criteria can be a sensible strategy to prevent new homeowners getting into arrears, it has affected existing homeowners too. Thousands of people who took out mortgages before the financial crisis have been rejected when applying for a new mortgage, even if the new deal is more affordable than their current one. These people have been nicknamed ‘mortgage prisoners’ due to their inability to escape from their current - and often expensive - deal.
How can mortgage prisoners switch to a better deal
- Speak to your lender and ask for specific reasons why your attempts to remortgage are being rejected.
- Ensure you have facts and figures on hand to prove that the new deal is more affordable and you’re able to make the necessary repayments
- Refer your lender to new guidance that states that lenders can waive affordability checks for existing customers.
Still stuck? Contacting a mortgage broker could help. By choosing an impartial and professional advisor with a comprehensive knowledge of the mortgage market, you may gain access to your new deal and make significant changes to your finances in the process.
