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Mortgage Prisoners: Your Rights and Next Steps

The stress of being stuck on a high-interest mortgage can feel overwhelming. If you’re a UK mortgage prisoner, know that you have rights! The Financial Conduct Authority (FCA) has regulations designed to help you escape high-interest mortgages. 

Get clear explanations of these rights, discover practical strategies for lowering your mortgage payments, and find out where to access expert guidance. It’s time to break free from the financial hardship of being a mortgage prisoner.

What is a Mortgage Prisoner?

In the UK, a “mortgage prisoner” is a homeowner trapped in their current high-interest mortgage. This situation mostly came about after the global financial crisis of 2008. Customers of failed lenders like Northern Rock were left in limbo when their current mortgages were transferred to inactive firms focused on debt recovery, rather than offering new mortgage deals.

To make matters worse, regulators tightened mortgage affordability tests in response to the 2008 financial crash. While necessary to prevent reckless lending, these strict new rules now make it difficult for people who took out mortgages under earlier guidelines to switch mortgage lenders, even if they have a perfect payment history.

How Many Mortgage Prisoners Are There?

The FCA estimated in 2021 that there were up to 195,000 mortgage holders in the UK. Of those, around 47,000 were determined to be trapped with no easy way out, despite being up to date with their mortgage payment obligations.

Why Did This Happen?

Northern Rock was a UK-based bank known for its aggressive lending practices. It specialised in mortgages but funded them through risky borrowing practices. When the 2008 financial crisis hit, the bank collapsed.

The Birth of the ‘Mortgage Prisoner’

The government bailout transferred thousands of Northern Rock mortgages to “inactive lenders“, such as UK Asset Resolution (UKAR). Unlike active lenders, these organisations primarily aim to recoup taxpayer money, not offer competitive loans. As a result, many ex-Northern Rock borrowers found themselves trapped on high interest rates even as mortgage market rates fell.

Adding to the problem, stricter affordability rules were introduced post-crisis to promote responsible lending. While necessary, these mortgage lending rules made it much harder for those “mortgage prisoners” to be able to switch lenders – even with good credit histories.

Your Rights as a Mortgage Prisoner in the UK

As a mortgage prisoner, it’s normal to feel trapped and frustrated. However, it’s essential to know that you DO have rights. The Financial Conduct Authority (FCA), the regulator of the UK financial industry, has introduced specific rules designed to help those in your situation. These are the key provisions:

Modified Affordability Assessment

This is crucial. Instead of being held to the strictest income and expense tests, mortgage providers can offer a “modified assessment“. This means your track record of consistently paying your mortgage on time is heavily weighed in their decision. Under this scheme, your chances of finding a better mortgage deal can greatly improve.

No Forced Borrowing

When utilising FCA rules for mortgage prisoners, you will not be required to borrow more than you currently owe. This protects you from taking on extra debt you may struggle to manage.

Focus on Your Financial Well-Being

The main goal of these FCA rules is not to repossess homes but to help mortgage prisoners find affordable payments. The emphasis is on collaboration between you and the lender to work towards a sustainable financial solution.

Understanding your rights is the first step towards regaining financial control. Don’t hesitate to explore the resources available and seek expert advice. They may be able to help you navigate this situation effectively.

Practical Actions for UK Mortgage Prisoners

Feeling trapped by a high-interest mortgage is stressful, but taking action can lead to a better financial future. Here’s a breakdown of your best options:

  1. Start with Your Current Lender

     

Contact your existing lender directly to enquire if they participate in the FCA’s modified affordability assessment programme. This could open the door to a more reasonable internal deal. Even if not part of the official scheme, your lender might have other mortgage products or arrangements more suitable for your circumstances. It never hurts to have a thorough conversation about your situation.

  1. Seek a Specialised Mortgage Broker

     

Seek a mortgage broker with proven experience and a deep understanding of your unique situation as a mortgage prisoner. These brokers often work with lenders who have flexible criteria for mortgage prisoners, potentially finding you rates unavailable through mainstream channels.

  1. Seek Legal Help – Misselling and Compensation

     

If you believe your initial mortgage was given when you couldn’t reasonably afford it, or you were given poor advice, this constitutes “misselling”. You might be entitled to compensation, which could ease your financial burden.

  1. Get a Free Consultation with Sandstone Legal

     

We specialise in mis-sold financial products, including mortgages. We offer a free assessment of your case to determine if you have a potential claim. You might also wish to pursue cases that our mis-sold car finance lawyers can handle for you. We offer a range of support from irresponsible lending to housing disrepair claims.

It’s essential to explore all potential avenues. Taking even one of these steps could dramatically lower your mortgage costs and put you on the path to financial freedom.

Could Your Mortgage Deal Have Been Mis-Sold?

Many mortgage prisoners unknowingly became trapped due to irresponsible mortgage lending practices before the crisis. If you received poor advice, were given a mortgage you couldn’t realistically afford, or weren’t fully informed of the risks, you might have a case for compensation.

What Does Mortgage MisSelling Look Like?

Here are some common scenarios that could indicate misselling:

  • High Loan-to-Value: Receiving a mortgage for more than the property’s value, or with very little deposit required.

     

  • Interest-Only with No Mortgage Repayment Plan: Being given an interest-only mortgage without a clear way to repay the principal at the end.

     

  • Unclear Affordability: Lenders approve your mortgage without properly assessing your true income and ability to make payments long-term.

     

  • Pressure Sales: If you felt rushed or pressured into a mortgage deal when you had reservations.

     

Compensation: More Than Just Financial Relief

Successful misselling claims can result in several positive outcomes:

  • Reduction of Debt: Compensation might lower your outstanding mortgage balance substantially. Seek expert debt advice from a reputable mortgage adviser.

     

  • Switch to a Better Deal: A payout can provide the funds needed to escape your expensive mortgage and switch to a cheaper mortgage deal elsewhere.

     

  • Peace of Mind: Knowing you were a victim of misselling offers validation and can reduce the emotional stress attached to being a mortgage prisoner.

     

At Sandstone Legal, we have helped many clients find justice regarding mis-sold mortgages.  We also specialise in mis-sold car finance and general irresponsible lending matters. We offer a range of support from irresponsible lending to housing disrepair claims.

Our process starts with a free, no-obligation consultation. We’ll carefully review your case, explain your options clearly, and let you know if we believe you have grounds for a successful claim.

Don’t Wait – Time Limits May Apply

It’s essential to note that misselling claims often have time limits. Acting promptly is crucial to protecting your right to seek compensation. Let us help determine if you’re eligible.

Break Free: Sandstone Legal Helps Mortgage Prisoners

Being a mortgage prisoner causes unnecessary financial and emotional hardship. We understand these unique challenges at Sandstone Legal. If you’re a mortgage prisoner, we provide free consultations to assess your situation, explain your rights, and explore switching lenders or a possible mis-selling claim. 

If anything from what you’ve read sounds familiar, don’t wait to get help. Contact us at Sandstone Legal today. 

 

This content is for informational purposes only and does not constitute legal, financial or professional advice. The information provided is of a general nature and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances and is not intended to be relied upon by you in making (or refraining from making) any specific decisions. 

 This site may contain links to third party websites. We are not responsible for and have no liability for the privacy or other practices of any such third party. We recommend that you review the privacy policies of each website you visit. 

This content is for informational purposes only and does not constitute legal, financial or professional advice. The information provided is of a general nature and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances and is not intended to be relied upon by you in making (or refraining from making) any specific decisions.This site may contain links to third party websites. We are not responsible for and have no liability for the privacy or other practices of any such third party. We recommend that you review the privacy policies of each website you visit.