I’m a mortgage prisoner – What can I do?

I’m a mortgage prisoner – What can I do?
Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: October 27, 2023

What to do if You’re a ‘Mortgage Prisoner’

If you’re trapped in a mortgage and, for various reasons, are unable to switch to a new mortgage provider to get a better interest rate, you’re a mortgage prisoner.

It’s not unusual, if fact, there are thousands of people like you, trapped by circumstances beyond their control.

This is usually because their financial circumstances have changed, preventing them from meeting a new mortgage provider’s affordability requirement, or an issue with the property that occurred after you bought it.

The problem can be compounded if you’re on your lender’s standard variable rate (SVR), as these are usually more expensive than fixed rate mortgages.

How to escape from a mortgage prison

Depending on your financial circumstances, there are a number of options open to you to help you break out of the mortgage prison.

Overpay your mortgage

If at all possible, see if you can overpay your mortgage. This will have the double benefit of paying off your mortgage early and increasing your equity.

Your mortgage provider can tell you how much you can overpay without incurring early repayment fees.

Increase your equity

How much of your home you own, also known as equity, will make lenders more receptive to your application.

You can increase equity through a cash injection or, as mentioned above, overpaying your mortgage.

Protect your credit rating

A good credit rating goes a long way toward convincing lenders that you are financially responsible and a good risk.

Pay any debt such as credit cards, utilities, phone contracts etc on time. Get rid of any outgoings you don’t absolutely need … Do you really need Sky, Netflix and Amazon?

If you have bad credit, then take a few months to repair it before applying for a new mortgage.

Downsize your home

If the kids have left home, ask yourself if you need a large home anymore? Moving to a smaller house or an area where property prices are lower might be something to consider.

Switch to a lender prepared to relax borrowing rules

This may be the best option for many people trapped in mortgage prison, providing they meet the criteria.

The Financial Conduct Authority (FCA) set new provisions that allows lenders to perform a ‘modified affordability assessment’, which allows lenders to waive some of the affordability checks.

It is important to understand that it is entirely optional as far as the lender is concerned, so they can relax the affordability checks, but only if they choose to do so.

All lenders are different, but you could be eligible if:

  • There is a minimum of 5 years remaining on your mortgage
  • The outstanding mortgage must be at least £50,000
  • You have been up to date with your mortgage repayments for at least 12 months
  •  You do not intend to ask for a higher mortgage
  • Your loan to value (LTV) is no more than 75%
  • If you’re on an interest only mortgage, you’ll need a clear repayment plan in place

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