Currently, thousands of individuals are “mortgage prisoners.” They are locked into poor mortgages that have high rates that they may not even be able to afford. However, change is coming and the Financial Conduct Authority has announced plans which will ensure these prisoners have a greater chance of moving to a deal that is more beneficial for them.
The new proposal emerged after the release of the city regulator’s Mortgages Market Study. The changes would mean that those who had a mortgage with lenders that were unregulated or inactive would be able to switch to a more beneficial option.
The new scheme is mainly targeted at those who are struggling to change lenders even when they do not want to borrow more money and have been keeping on top of payments. The FCA claim countless customers have told them of their desire to do this but regulations have blocked this possibility.
Now, the FCA is strongly considering changing responsible lending rules and modifying the affordability assessment. Customers who have constantly maintained payments on their existing mortgage should find it easier to escape to a better deal once these plans are put in place.
Who Is This Relevant To?
The numbers are staggering. Reports reveal that more than 150,000 homeowners are trapped with poor mortgage rates because they do not measure up to the current affordability assessment requirements. These were brought in after the 2014 Mortgage Market Review.
The majority of these homeowners are with firms which don’t have the authorisation to lend. The remaining 30,000 are on variable rates or reversions rates with lenders that do have authorisation.
For customers who aren’t looking to increase the amount they are borrowing or are eager to get better rates, the proposed changes could be a lifeline.
Why You Must Review Your Mortgage
Are you unsure whether you might benefit from this change? Then, you do need to make sure that you review your mortgage. You need to explore your current rate and decide whether this is providing the benefits that you need. You should then check whether you are able to move to another mortgage. If you are, it might be time to explore remortgage options that are currently available. Make sure that you speak to an expert about this so that you can get a good feel of the market right now.
There is certainly evidence to suggest this could benefit a homeowner like you. According to the FCA, more than 800,000 homeowners would benefit from a switch and currently are eligible to do so even without the proposed changes. The potential savings could be tremendous too. You might have been paying a higher rate than you needed to for more than five years and by making a change, you could save £1000 annually. You can only do this if you find out exactly where you stand with your mortgage.
If you are not eligible to change your current mortgage, keep a check because the proposed alterations to the mortgage assessment requirements may provide the answer you need.