New deals are on offer to “mortgage prisoners” – homeowners who have found themselves trapped in expensive mortgages and struggle to find a way out of them.
Homeowners become a mortgage prisoner when their circumstances change some time into the deal and their new financial position means they can no longer pass the affordability criteria of their lender or any other lender.
Stuck on high interest rate
Often this means the borrower is stuck paying a high interest rate with no prospect of being able to move to a better rate.
The Financial Conduct Authority has encouraged lenders to introduce more products that could help mortgage prisoners.
And now the Ipswich Building Society has stepped into the breach with six new remortgaging products that could set mortgage prisoners free.
No stress test for borrowers
According to the lender, borrowers won’t be “stress-tested” for these mortgages, which should mean they are more likely to pass the affordability checks. Stress testing looks at an applicant’s finances to ensure they can still make their repayments if interest rates rise.
The Ipswich mortgages will simply test if the borrower can afford the repayments at both the deal’s introductory rate and the lender’s standard variable rate. Applicants will still need to have a good credit score and other affordability checks will still be carried out.
However, the lack of a stress test is likely to help more mortgage prisoners break free from the deal they’re trapped in.