UK Finance: Voluntary Agreement for Mortgage Prisoners

The mortgage market in the United Kingdom has witnessed a series of challenges in recent years. The issue of ‘mortgage prisoners’ has been one of the most pressing concerns for the British government. A mortgage prisoner is an individual who is currently stuck in an existing mortgage deal and is unable to move to a more affordable deal due to the strict lending rules. These stringent rules were put in place to prevent the kind of financial crisis that saw millions lose their homes in the late 2000s.

But that does not help the thousands of mortgage prisoners that are currently trapped in expensive deals. The situation has been called a ‘scandal’ by some campaigners, who argue that homeowners should be given the freedom to switch to better deals and save money. In response to this crisis, UK Finance, the industry body that represents the banking and finance industry in the UK, has proposed a voluntary agreement that could help mortgage prisoners.

What Is the Voluntary Agreement for Mortgage Prisoners?

The voluntary agreement would see lenders, government and regulators come together to help mortgage prisoners. The proposal suggests that lenders would work to identify customers who are mortgage prisoners and contact them to inform them that they may be eligible for a more affordable mortgage. However, not all mortgage prisoners will be eligible for a new mortgage, those who are in negative equity or have arrears on their existing mortgage are likely to be excluded.

The proposed agreement aims to help around 10,000 mortgage prisoners. The Financial Conduct Authority (FCA) has welcomed the proposal, stating that it is a ‘good start’. However, some consumer groups have criticised the voluntary agreement, stating that it does not go far enough to help all mortgage prisoners.

What Does It Mean for Mortgage Prisoners?

If the voluntary agreement is approved, it could mean that some mortgage prisoners will be offered a more affordable mortgage. This may help to lower their monthly repayments and reduce the financial strain that they are currently experiencing. However, it is important to note that not all mortgage prisoners will qualify for a new mortgage.

What Can Mortgage Prisoners Do in the Meantime?

If you are a mortgage prisoner and are struggling to meet your monthly mortgage repayments, there are a few steps that you can take to help reduce your financial burden. You can speak to your lender about the possibility of switching to an interest-only mortgage, which would reduce your monthly repayments. You can also consider speaking to a mortgage broker who may be able to find a more affordable deal for you.

Conclusion

The proposed voluntary agreement for mortgage prisoners is a positive step towards helping thousands of homeowners who are currently trapped in expensive mortgage deals. However, it remains to be seen if all mortgage prisoners will benefit from the proposal. Homeowners who are struggling with their mortgage repayments should seek advice from a financial professional to explore all available options.