'Mortgage prisoners' offered help to switch products under new agreement

Many "mortgage prisoners" trapped on a higher rate will now find they are able to move to a better deal from their existing lender following a new industry agreement.

The moves aim to help some customers who have been sitting on their lender's standard variable rate (SVR), following their initial deal coming to an end.

Stricter affordability rules introduced in the wake of the financial crisis mean that, despite keeping up with their repayments, some borrowers would benefit from switching to another deal with their existing lender but they have been unable to do so.

The Financial Conduct Authority (FCA) has estimated that there are 10,000 of these customers with active lenders, based on data from 2016.

Lenders will be identifying and contacting eligible customers before the end of 2018 with details of potential alternative deals.

Some 59 lenders representing 93% of the UK's residential mortgage market have agreed the new standards.

The voluntary commitment was announced by UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA).

The circumstances of the case and the lender's policy will determine what options may be available and it is up to borrowers to decide whether they want to move to the possible alternatives or not.

To qualify for a potential mortgage switch, borrowers will have to meet certain criteria, including being the existing borrowers of an active lender, looking for a like-for-like mortgage, being up-to-date with payments, having at least two years left to run on their remaining term and having a minimum outstanding loan amount of £10,000.

Customers who have built up aggregate arrears of more than one monthly payment in the past 12 months are not eligible.

The commitment is focused on customers with active lenders initially.

Jackie Bennett, director of mortgages, UK Finance, said more lenders are expected to take part in the agreement in the coming months.

She said: "Participating lenders will be contacting qualifying home owners so for now, customers don't need to do anything but wait to hear from their mortgage provider."

Paul Broadhead, head of mortgage and housing policy at the BSA, said: "By signing up to this voluntary agreement lenders will ensure that existing borrowers are not disadvantaged by the changes to mortgage regulation since the financial crisis.

"The agreement formalises the actions that many societies have been taking and provides clarity and confidence for all affected borrowers."