A new report from the CML suggests that up to 5.5 million home owners could become mortgage prisoners if the new FSA proposals come into force.
Stricter rules will mean that 20% of all home owners (over 2 million people) will be unable to remortgage or get a new loan in the future and another 30% would only be allowed a mortgage worth less than the one they currently have.
People would be stuck on high standard variable rates and if they wanted to move, the chances are they would need to downsize rather than move to a bigger property.
This scenario could well be the final nail in the coffin for the UK housing market as traditionally first-time buyers have purchased properties at the lower end of the price range as existing home owners upsized.
Meanwhile, UK mortgage lending companies were trying to entice homeowners to take out a remortgage last month according to a new report from the Bank of England.
The BoE has revealed that the price of a tracker mortgage dropped to 3.5%, a record low, after the rate fell for the third month in succession.
People looking for a two year fix, and with 25% to put down as a deposit, found interest rates at their second lowest level for fifteen years, whilst five year fixed rate products reached a five year low of 4.85%.
Despite these drops in mortgage rates, the swap rates, ended last month a little higher than they started it.
Mortgage experts believe increased competition caused the declines as more lenders try to get people to remortgage away from low standard variable rates. A number of new products have been launched recently, specifically for remortgage purposes.
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