Have you become a prisoner to your mortgage? If so, you’re not alone, there are currently around 3.5 million homeowners in the UK who cannot find a cheaper deal or move home.
The hardest hit are the mature borrowers who have spent many years paying back their mortgage. Tens of thousands of them reach the end of their current mortgage deal each month but find they are unable to take out a new loan because of the strict lending criteria laid down by mortgage lending institutions.
Mortgage experts predict the situation will get worse as house prices continue to decline. Lloyds Banking Group recently said that 150,000 of its mortgage customers have negative equity, meaning they do not have any money to put down as a deposit if they want to move.
People who would like to be moving home are also trapped because their current contractor mortgage is not transferable to a different property.
The FSA intends to make sweeping reforms to the way financial institutions approve mortgages. Borrowers will have to pass more detailed checks to ensure they can afford their mortgage repayments. These rules are not yet official but a lot of lenders have already clamped down.
The CML has estimated that more than half the people who have obtained a new mortgage since 2005 would not pass the new strict checks.
A lot of people are unable to benefit from some of the lowest ever mortgage interest rates. Data from the FSA shows that 33% of all mortgage holders are paying more than 4.5% interest despite the Bank of England’s base rate sitting at 0.5% for over 2 years. The best deals on the market are currently as low as 2.04%.
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.
