Is Help at Hand For Mortgage Prisoners?

by Mark Johnston

Is Help at Hand For Mortgage Prisoners?

It seems that falling house prices amongst other things have now turned many home owners in to mortgage prisoners. As many of these home owners have seen the equity in their homes eroded or even wiped out completely.

Recent research has also shown that many people in the UK including home owners have been unable to obtain further finance for mortgages due to them been self employed, having credit impairment problems or just employment changes.

first time buyers 1The Financial Service Authority (FSA) estimate that up to 45 per cent of mortgage holders who have taken out a mortgage since 2005 could be mortgage prisoners.

The HSBC also reckon that that the number of mortgage prisoners has soared by 40 per cent in little more than a year and that they now account for nearly a fifth of all home owners on their lenders standard variable rates (SVR).

Most borrowers that are stuck on their lenders standard variable rates (SVR) are now more than likely paying over the odds as the average standard variable rate (SVR) at the moment stands at around a hefty 4.86 per cent.

However according to broker Springtide Capital, increased lending, innovative products and criteria from lenders may allow many mortgage prisoners to move their mortgages in 2013.

Some lenders such as the Clydesdale bank and Kent Reliance already appear to be coming up with more flexible indemnity solutions in order to try to help those with an unusual or difficult financial position.

The final Mortgage Market Review (MMR) rules should also improve the situation for existing borrowers by making it less complex for lenders to provide appropriate ongoing access to appropriate products.

Also with the current mortgage price war in full throttle, David Hollingworth, of broker London and Country, states that “there is certainly a heightened level of competition and lenders are keen to attract new business with extremely low interest rates”.

Experts therefore believe that the funding for lending scheme will eventually mean that while most mainstream lenders will be competing to lower their rates for those with large deposits or equity, smaller lenders will take advantage of the gap in the market this will produce by coming up with more innovative products for bespoke requirements. Therefore this could see many more so called mortgage prisoners finally able to obtain a suitable product to fund their move.

Current figures have revealed that an estimated 3.6 million borrowers already on their lenders standard variable rates (SVR) have loan to value (LTV) ratios below 85 per cent and could therefore now snap up a better mortgage rate than they one they are on, possibly even saving themselves up to £1,000 at the same time.

It seems then that evidence is building that many borrowers can and should be now looking to remortgage on to a better deal while they still can. 

Nevertheless despite all this lenders still have the option as to whether they chose help these particular customers or not!

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