Mortgage Prisoners – Who They Are and What Can Be Done
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The term mortgage prisoner is one that has appeared more and more in the press in recent years, but for many homeowners it is not always clear what it means, how people find themselves in this situation, and what options, if any, are available to them. The phrase describes a group of borrowers who are, through no fault of their own, stuck paying higher rates on their mortgage because they cannot switch to a more affordable deal.
This issue is a complex and often distressing one, so it’s worth unpacking it carefully.
How do people become mortgage prisoners?
The roots of the problem go back to the 2008 financial crisis. In the aftermath, several lenders either collapsed or had their mortgage books sold to other institutions. Many of these loans ended up with firms that do not offer new mortgages or competitive remortgaging options, sometimes referred to as “inactive” or “closed book” lenders.
At the same time, new regulations were introduced to ensure borrowers could only access mortgages they could reasonably afford. While these were sensible changes for new lending, they created an unintended consequence. Borrowers who had always kept up with their payments suddenly no longer passed the new affordability assessments, often because of stricter income rules, changes in credit scoring, or falling property values.
The result was that thousands of people ended up “trapped”: unable to switch to a mainstream lender, even though a cheaper mortgage was available in the wider market.
The human impact
The financial burden of being a mortgage prisoner can be significant. Many are stuck on Standard Variable Rates (SVRs) or other legacy rates that are often far higher than the deals available to new borrowers. For someone with a large balance, the difference in monthly repayments can be significant.
But beyond the financial strain, there is an emotional toll. Mortgage prisoners often feel punished for circumstances entirely outside their control. They did not borrow irresponsibly, yet they are denied the same opportunities to remortgage as other borrowers. In some cases, this has meant years of stress, reduced disposable income, and a knock-on effect on other aspects of life such as family wellbeing, career choices, or retirement planning.
Government and regulatory interventions
Recognising the problem, both the Government and the Financial Conduct Authority (FCA) have taken steps in recent years to ease the pressure.
In 2019, the FCA introduced modified affordability rules for certain borrowers with inactive lenders. This meant that, in theory, lenders could offer new products to mortgage prisoners if the borrower was up to date with payments and not seeking to borrow more.
However, the impact of these changes has been limited. Relatively few mainstream lenders have opted to take part, citing operational and risk management challenges. As a result, the number of mortgage prisoners able to switch under these rules has been far smaller than campaigners had hoped.
The Government has also explored potential solutions, including working with lenders and regulators to encourage more flexibility. There has been ongoing debate about whether stronger intervention, for example, mandating lenders to offer certain rates, might be required, though such steps raise wider questions about market fairness and unintended consequences.
Possible routes out
For anyone worried they might be a mortgage prisoner, the picture is not entirely without hope. A few potential routes exist:
Specialist lenders – While many mainstream banks may not be able to help, some specialist or smaller building societies are open to applications from borrowers in this position, particularly if there is a strong track record of repayment.
Product transfers – In some cases, even closed book lenders have been known to offer limited product transfers or rate switches, although this is not always widely publicised. It is worth asking the lender directly whether any options exist.
Modified affordability rules – Certain lenders do use the FCA’s adapted criteria, so with the right advice it may be possible to access a more competitive product than expected.
Improving circumstances over time – For some, the solution is gradual. Paying down the balance, improving credit records, or seeing property values rise can, over time, open the door to mainstream deals that were previously out of reach.
Professional advice – Perhaps most importantly, speaking with a qualified mortgage adviser can be invaluable. Advisers are aware of which lenders are sympathetic to these cases and can help navigate the often complex landscape.
Looking ahead
The issue of mortgage prisoners is unlikely to disappear overnight and we are over a decade since the financial crisis in 2008. Campaigners continue to press for stronger protections and more widespread solutions, and political attention may well grow in the new interest rate environment. For now, the best course of action for affected borrowers is to seek professional guidance, explore all available options, and keep up to date with regulatory developments.
Conclusion
Being a mortgage prisoner can feel deeply unfair, but it is important for anyone in this situation to remember that they are not alone. Thousands of people are in the same position, and the challenges they face are increasingly recognised by policymakers and the wider financial services community.
While progress has been slow, the direction of travel is towards greater awareness and more tailored support. With the right advice and persistence, there may be ways to ease the burden, and hopefully in time the system will evolve to ensure that responsible borrowers are not left trapped by the circumstances of the past.