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MORTGAGE PRISONERS

By Chris Bramham

Cry Freedom!

In light of some recent disturbing world events, quite understandably we need to step carefully when using the term prisoner or captive. When we refer to a “Mortgage Prisoner” this is not just a throwaway comment or one which should be compared in any way to other uses of the term. It is however a serious problem for a growing number of homeowners, the majority of which are innocent of any wrongdoing and simply a victim of circumstance. This problem is further amplified by impending interest rate rises which will work to heap even more pressure on those trapped on high rates, mainly SVR’s, who don’t know how to escape their current mortgage confines.

In times gone by this reference may have been associated with homeowners who had encountered financial difficulties or sub-prime clients, but now many are simply genuine creditworthy clients who are unable to pass the current affordability measures set out by many high street lenders. Which leads to the question – has this issue being extrapolated by the recent Mortgage Market Review rules?

Well the fact is that the MMR rules are here to stay. The industry has had plenty of time to implement the necessary changes to arrive at the new norm. Inevitably any widescale policy and regulatory shift will result in teething problems and delays, irrespective of what industry it pertains to. This has certainly been the case with the MMR and it also appears that some elements appear to have been lost in translation when it comes to the rules surrounding existing borrowers.

There were many comments made shortly after the MMR regarding the interpretation of the Transitional Arrangements for Existing Borrowers, but the fact remains that little has happened on this.

Lynda Blackwell from the FCA, went on record in May stating that lenders were failing to apply the rules to existing borrowers and that they were in fact still losing out. The rules are very clear in that they allow existing borrowers to move lender or switch rate with an existing lender, where there is no material change to the Mortgage Contract. Research I have undertaken and the anecdotal evidence from my industry peers is that full affordability checks are being adapted by lenders in all cases, and the Transitional Arrangements are not being applied. Meaning thousands of homeowner will continue to be trapped.

Thankfully there is some light at the end of the tunnel for many. As a specialist distributor we are working closer than ever with some innovative and dynamic lenders to enable such borrowers to escape their current deals. So let’s underline that whilst elements of the MMR have restricted some mainstream lending, options do exist. And brokers remain in the best position to realise which of their clients are affected and who to engage within the specialist markets to help identify the right kinds of solution, which will have to continue to bypass the vast majority of high street lenders.