Lenders are supporting customers through the additional financial strain caused by the Covid-19 pandemic. At the same time, the banking and finance industry has been working to assist customers and innovate in the market. As part of this work, both large and small lenders are developing new products or introducing flexibility to their lending criteria to help creditworthy borrowers who are on closed mortgage books or have mortgages with unregulated firms and are currently unable to switch to a new product  (often referred to as ?mortgage prisoners?) obtain mortgages with active lenders.

Research published recently by Money Saving Expert and the London School of Economics set out a number of proposals to improve further the situation of ?mortgage prisoners?. The banking and finance industry is sensitive to the challenges of being a ?mortgage prisoner? and is considering all possible solutions in pursuit of the best outcomes for consumers. UK Finance has worked with a range of banks and lenders to develop new product offerings, and will continue to work with members, government and the Financial Conduct Authority (FCA) to find solutions for as many customers as possible.

It is important to bear in mind that these changes will not mean all ?mortgage prisoners? will be able to get a new mortgage. Customers on interest-only mortgages will be unable to do so if they lack a repayment vehicle for loans within the timeframe required. Equally, those on high loan to value (LTV) mortgages may not be able to find a cheaper mortgage, and it is difficult to obtain a mortgage on a property that is in negative equity. Moreover, these changes will not be available to customers with current or recent arrears, outstanding fees and charges, or a low minimum balance or short remaining term. Lenders have to work within guidelines established by the FCA to ensure that all mortgages are affordable to prospective customers.

Those customers who are eligible for a mortgage with a new lender are beginning to receive letters from their lenders informing them that they could be entitled to a lower rate. This may include some customers who took out their mortgages in the early 2000s on a rate which has consistently been very low. The Mortgage Market Study estimates that 120,000 borrowers are already on a low rate and would not benefit from a move to a new mortgage. Customers should therefore look very carefully at whether they would benefit from moving to a new mortgage and would be advised to consider seeking independent financial advice before making any decisions.