MSE: Mortgage prisoners freed under new affordability rules
The first mortgage prisoners have been freed under new affordability rules, which came after a MoneySavingExpert campaign, it has outlined.
According to MSE, one of the freed mortgage prisoners is saving almost £500 per month as a result of the campaign.
Last year, the Financial Conduct Authority (FCA), introduced new rules which allowed lenders to use modified affordability assessments for mortgage prisoners who met certain criteria.
Following this rule change, four lenders adopted these modified assessments, with West Brom Building Society revealing that it has now completed transfers for “a handful” of mortgage prisoners.
Maurice Latimer, one of the first to be freed following the rule changes, took out an interest-only mortgage with Northern Rock in 2001.
When Northern Rock collapsed, his mortgage was sold on to a firm called Cerberus.
He then struggled to get another because his and his wife’s joint income was too low to pass some affordability checks and as he would have turned 65 before the end of his term.
Latimer was paying a 4.59% interest rate, which has now been reduced to 1.84%, halving his payments from £886 to just £401.
Latimer said: “For years, I just got letters saying what was happening by whoever was in charge of my mortgage and I basically had no say – I was passed round like a parcel.
“I’d tried to switch deals before, but I knew it was a waste of time because of the strict affordability checks. I couldn’t get anything until West Brom came along.
“Before this saving for me and my wife, the freedom to do what we wanted with our money was gone.
“I reckon I’ve paid tens of thousands more than I should have, and it’s nothing to do with me – it’s not my fault at all.”
Furthermore, the FCA estimate that the new rules would only help up to 14,000 of the 250,000 mortgage prisoners, but the hope was that they would allow lenders to let more people switch.
Martin Lewis, founder of MoneySavingExpert.com, said: “Maurice’s tale brought a big smile to my face.
“For years we pounded at the doors of politicians and regulators to tell them that remortgaging affordability criteria were simply illogical and unfair.
“This meant some people who were meeting current repayments, but wanted to shift to a lower rate, were nonsensically having to be rejected and told ‘you can’t afford a cheaper deal’.
“While this is good news, it’s no silver bullet. This is just one small change needed to help the 250,000 mortgage prisoners.
“It won’t help most. These prisoners are the forgotten victims of the last financial crash.
“While the government bailed out the banks, mortgage prisoners were unfairly left behind in financial misery.”