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p>Chris Bramham, Head of Mortgages and BTL at Brightstar has been publicising the fate of so-called ‘mortgage prisoners’ in the mainstream mortgage sector over the last several weeks and months. For anyone that is unfamiliar with the term ‘mortgage prisoner’, it relates to clients that have taken mortgages under more flexible conditions that currently exist in the mortgage market and now find themselves unable to move home or run the risk of losing their mortgage. If you check out the official twitter feed @BrightstarMort there is a link to an article in The Daily Telegraph highlighting the issue.
Indeed, The Telegraph has also been championing the cause of the ‘mortgage prisoners’ and there was an article today pointing out the fact that many bank customers are being denied the opportunity to port their mortgages as they no longer meet the lenders’ requirements around affordability and / or age.
The premise of the article is that the borrowers being denied the chance to move their mortgages are the clients on the historically very low tracker rates. The FCA stated that existing borrowers should not be subject to the same hurdles as a new customer, but for whatever reason, the lenders do not, anecdotally at least, seem to be giving their existing clients any extra leeway.
The whole issue is fraught with conflicting arguments as the various regulatory bodies have sought to tighten up lending criteria in the wake of the credit crunch, but also stated that existing customers should not be set to the newer, higher standard. The cynical view is that lenders are using these rules as an excuse to put borrowers on to higher rates when they look to port their existing mortgages, and I am sure that the lenders would counter argue that they are simply being prudent by following the current rules with regards to mortgage lending.
In the commercial market, the lending rules were tightened up by the lenders across all sectors and relative to the pre-credit crunch, the lending terms are still restricted. I appreciate that commercial lending is less of an emotive subject than home lending, but I still have a number of clients that find themselves in the same situation as the ‘mortgage prisoners’. To give one example, I have a client that has a large portfolio financed with a high street bank for around £4 million. It is on an interest-only repayment and has a very favourable margin above base. The client has tried to purchase new investment properties recently, but has been forced to fund these with other lenders as his main bank will not consider any new lending unless he refinances his entire portfolio. This would entail going onto a repayment loan with new fees and a new pricing margin. I understand why his bank wants to do this, but it does seem at odds with the concept of treating customers fairly, which is meant to be at the heart of everything that we do in financial services.
Chris Bramham, Head of Mortgages and BTL at Brightstar has been publicising the fate of so-called 'mortgage prisoners' in the mainstream mortgage sector over the last several weeks and months....
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