Freedom for Mortgage Prisoners

"So-called ‘mortgage prisoners’, trapped on expensive deals and unable to switch to cheaper loans are a reflection of a dated lending environment"

Says Ross Boyd, founder of the ‘always-on’ mortgage switching platform, Dashly.com. Here he examines their plight and asks what can be done to help them.

The percentage of mortgage prisoners out there is small, if not tiny, compared to the market as a whole. But that doesn’t make the case to set these people free from the punitive Standard Variable Rates (SVRs) they are stuck on any less pressing.

The moral imperative to help out this small minority is growing by the day and you sense a solution is not far off to circumvent what Chris Woolard, a senior figure at the Financial Conduct Authority(FCA), describes as the intricacies of the regulatory perimeter...

Isn't this a bit absurd?

These people are trapped in the bizarre position where, despite managing to meet their mortgage repayments at significantly inflated SVRs, they are told they cannot afford a cheaper rate because they do not meet today’s far stricter affordability criteria.

Who needs to go to a Harold Pinter or Samuel Beckett play when the Theatre of the Absurd is unfolding right before our eyes within the UK mortgage sector?

The biggest irony of all is that the banks are actually keen to get these prisoners back into the regular mortgage system — they’ve shown their repayment mettle, after all — but doing so could create issues with the FCA.

The mortgage prisoners debate is symbolic of a bigger narrative unfolding, focused on the fundamental need to change the way consumers are treated by financial services providers...

How technology can help

Thankfully, this is all set to change.

Essentially, new technologies are emerging that are using open banking, big data and machine learning to turn the way people secure mortgages on its head.

These technologies will effortlessly help borrowers switch by alerting them (and, where relevant, their advisers) in real-time to mortgage products they will be applicable for.

We’re entering a  socially-conscious era for financial services where providers that don’t adhere to the new ‘customer-centric’ rules will fast become irrelevant. It’s an era where the SVR will quickly look like an anachronism.

It’s finance, Jim, but not as you know it. It’s finance for good.

You can read the full article from What Mortgage here.

Related Content

Interest Rates

To long-term fix or not to long-term fix? That is the question

Following November’s rate rise, a number of articles ran urging people to consider long-term fixed rate mortgages, of 5, 7 or even 10 years. But while long-term fixes can be perfect for some, they can be a disaster for others.

Getting Started

Discovering the Power of an AIP

The chances are that if you’re in the market for a property you will have heard someone mention an AIP, or “agreement in principle.”

Property

5 home renovations to make your property value skyrocket

Did you know that increasing the value of your home makes you eligible for a cheaper mortgage deal? Or that increasing the value of your home actually could shave up to 0.5% off your interest rate?