Thousands of UK homeowners are stuck paying high mortgage rates because they can’t switch to a better deal, but there can be ways out of your current situation. Here we’ll explain what a mortgage prisoner is, why it happens, what your options are today, and how specialist brokers can help you get the solution you need.
What is a mortgage prisoner?
A mortgage prisoner is someone unable to switch to a new mortgage deal. This is usually because their existing lender no longer lends, their affordability no longer fits modern criteria, or their circumstances have changed since they initially took out the home loan.
Most mortgage prisoners are stuck paying the lender’s Standard Variable Rate (SVR) - often much higher than typical rates. It’s a difficult situation to get stuck in, because even if you can comfortably afford your current (high) monthly repayments, it feels unfair that so many doors are shut for reasons outside your control.
Types of mortgage prisoners
Mortgage prisoners tend to fall into two broad categories:
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Closed-book or inactive lenders: These are customers of lenders who no longer offer new mortgages.
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Borrowers who no longer meet affordability rules: After the 2014 Mortgage Market Review (MMR), affordability rules tightened significantly. Some borrowers who qualified under pre-2014 rules can no longer pass modern stress tests, even with a track record of years of on-time payments.
How homeowners become mortgage prisoners
Here’s a more detailed look at several common routes that can lead homeowners into mortgage-prisoner status:
1. Your lender became inactive or sold your mortgage
When some mortgage books were sold after the financial crisis, customers found themselves with lenders who no longer offered new products.
If your lender has no fixed rates or other options to switch to, you’re effectively trapped on their SVR.
2. You fail modern affordability checks
Even if you’ve been paying your mortgage reliably for years, you may fail current affordability assessments due to:
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Increased interest-rate stress testing
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A lower income compared with when you originally applied
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New debts or financial commitments
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Changing from employed to self-employed
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Age-related lending caps
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Changes in property type (for example, cladding issues) or valuations
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Using expired schemes like Help to Buy
3. You have a high loan-to-value (LTV)
If your property value has fallen significantly, or you took out a high LTV mortgage and have very little equity, you may not qualify for competitive remortgage rates if you need to move and switch elsewhere.
This can happen quite easily if your property sees a sharp drop in its valuation, potentially leaving you with little or negative equity.
4. Interest-only mortgages with no repayment plan
Many mortgage prisoners have legacy interest-only loans and cannot switch because lenders require a credible repayment strategy.
Interest-only mortgages were more common pre-financial crash, and your household finances could be based around an unrealistic budget if you need to move to a repayment mortgage.
Your mortgage options
Being a mortgage prisoner severely restricts your choices, but there are potential escape routes. Your best option depends entirely on who currently owns your mortgage and your financial circumstances.
1. Switching with an active lender
If your mortgage is owned by an active lender (one that still offers new mortgage products, even if they are expensive), your first option is to apply for a product transfer.
A product transfer often involves minimal affordability assessments because you are staying with the same lender. This is usually the easiest and quickest path to escaping the SVR.
2. The ‘Green Channel’ (FCA switch)
If you are trapped with a dormant, inactive, or closed-book lender, the FCA has created a catchily titled pathway known as the ‘Modified Affordability Assessment (MAA)’, sometimes referred to informally as the ‘Green Channel’, making it easier to switch to certain new, active lenders.
The FCA allows some new lenders to use a modified, simplified affordability test for mortgage prisoners who are stuck, provided they meet strict criteria.
Accessing this channel requires specialist advice, as only a small number of lenders participate, and their individual eligibility rules are highly specific.
3. Specialist lenders and adverse credit
If you have a history of bad credit or if your type of income is unconventional, standard MMR rules are even more complex to pass.
Specialist mortgage lenders have more flexibility than mainstream lenders’ affordability models and may use manual underwriting, allowing them to tailor their approach to your specific circumstances.
Explore your mortgage options
Tips for improving your situation
One of the worst things about being a mortgage prisoner is that the situation can be largely out of your control. However, here are some tips to focus on that may be able to speed up the process and help you move to a better deal:
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Increase your income or salary where possible
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Improve your credit score (or ensure there are no mistakes on file)
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Overpay on your current mortgage to boost your equity
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Consider downsizing and moving to a cheaper property
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Work to reduce your debts and lower your spending where possible
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Ensure you’re using a specialist broker experienced with mortgage prisoners
How Money Helpdesk can help mortgage prisoners
Escaping mortgage prisoner status requires specialist knowledge of the MMR rules and deep relationships with the small number of lenders operating in the FCA Green Channel.
The reasons you’re a mortgage prisoner can be complex, and many applications fail simply because borrowers apply to the wrong mainstream lender.
Here’s why struggling homeowners and mortgage prisoners choose Money Helpdesk:
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Direct access to the FCA’s Green Channel lenders
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Brokers with expertise in packaging and presenting complex applications
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Free initial chat with no obligation to proceed further
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Our advisors have proven experience with mortgage prisoners
If you’d like to explore your options with an expert review of your mortgage prisoner situation, you can get started here.
FAQs
The Financial Conduct Authority (FCA) is aware of and acknowledges the mortgage prisoner issue. To address the problems faced by homeowners, they introduced the Green Channel to encourage active lenders to take on mortgage prisoners with more lenient affordability checks.
The FCA’s stance is to facilitate switches when they are clearly affordable, safe, and beneficial to the borrower.