Copy article

MoneyWeek article- mortgage prisoners

Journalist: Marc Shoffman, Freelance

ended 23. July 2024

Thousands of mortgage prisoners are taking TSB to court today over mortgage rates charged on home loans.

The borrowers had mortgages with Northern Rock that were transferred to TSB when the lender collapsed during the financial crisis but the homeowners claim the rates they are now being charged are unfair as they are above what TSB charges others on its SVR and has left them trapped and unable to remortgage.

I am keen on comments on how to escape if you have become a mortgage prisoner, e.g your income has changed or your house has fallen in value so you can no longer remortgage or meet new affordability requirements?

What steps should people take if they are a mortgage prisoner? How to avoid it? What support is available?

5 responses from the Newspage community

Copy all

Copy

Platinum
Stephen Perkins
Managing Director at Yellow Brick Mortgages
It is essentially profiteering, they accepted the risk of the book when they inherited it, they should be offered product transfer products or the bank’s standard variable rate they offer to all clients. To take advantage of those with no other options available is certainly not treating customers fairly.
Copy

Platinum
Ben Perks
Managing Director at Orchard Financial Advisers
It will be interesting to see which way the Courts go on this. TSB arent the worst offenders here, there are many mortgage prisoners that are being charged a fortune by companies that have brought their mortgage debt from collapsed lenders. It is opportunism at its finest and does not align with consumer duty at all.
Copy

Platinum
Justin Moy
Managing Director at EHF Mortgages
TSB should be able to offer those borrowers some product transfer products, even if the Loan to Value (LTV) remains high, given that many high street lenders offer a catch-all product for those above 95% based on today's values. Give borrowers a chance to pay down their mortgage and escape this position that affects more than just their finances.
Copy

Platinum
Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Mortgage prisoners have a few options in the current circumstances. But primarily, they will involve reducing their borrowing or increasing their income (through a second job, say). The first step should be to consult an independent mortgage broker, while actively working on improving their personal credit scores over the next year. There are also a number of specialist lenders out there who will consider such cases, each on its own merit. Opting for a fixed-rate mortgage, and conducting annual financial reviews, while maintaining an emergency fund are key preventative measures for people stuck in this situation.

Support is available from various organisations including Citizens Advice offers who can offer free financial guidance for mortgage prisoners but ultimately it is down to reducing the debt and increasing the gross earnings to get out of the hole.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Mortgage books, both from collapsed lenders and currently trading ones, are bought and sold as investments by businesses that are not themselves lenders (albeit they may ultimately be owned by a lender). This means they do not hold the required regulatory permissions or have the resources to offer product transfers and additional borrowing. They are investment businesses, not lending businesses, which creates issues if you are a borrower whose mortgage is owned by one of these companies. A proportion of the business that sits within these books will have been lending that is not acceptable to most lenders now, such as self-certification of income or mortgages at over 100% of the property value. The regulator has created new rules and systems to try and help, so huge volumes can now be moved, people should speak to a mortgage adviser to see what options they have available, they may be pleasantly surprised at what could be available to them now.