What is a Mortgage Prisoner?

‘Mortgage prisoners’ are people who are unable to switch mortgages to a better deal, despite being up-to-date with their mortgage payments.

Where does the name come from?

As the name suggests it is a situation where homeowners are ‘trapped’ in their existing mortgage, unable to switch to a deal with better terms, or rates. The term ‘mortgage prisoner’ surfaced during the financial crisis of 2008.

How does someone become a mortgage prisoner?
Mortgage prisoners often arise due to a combination of factors such as changes in economic downturns, lending practices, and regulatory constraints.

Below are a couple of scenarios which could lead to a borrower becoming a mortgage prisoner:

  1. High Loan-to-Value (LTV) Ratio: if you have taken out a mortgage with high LTV ratios, which means you borrowed a large portion of the property’s value (read more about LTV here). If the value of the property declines, or if your financial situation deteriorates, you may find yourself in a position where you owe more on your mortgage that the property is actually worth. This can make it difficult to refinance or switch lenders.
  2. Tightened Lending Criteria: following the financial crisis, lenders have implemented stricter lending criteria, making it more difficult for borrowers to secure new mortgages. This means, some existing homeowners who were previously able to get a mortgage do not meet the new criteria when trying to switch to a new lender or negotiate terms.

Unfortunately, mortgage prisoners may be stuck with higher interest rates and unable to benefit from any lower interest rates on the market. There are regulations and policies in place which provide initiatives to provide relief and potential solutions for those affected and facing financial hardship.

The team at Mortgage Required will be happy to talk further about Mortgage Prisoners with you. Give us a call on 01628 507477 or email team@mortgagerequired.com 

Recent posts

Everyone has their own traditions at Christmas time, but we have put this short blog together to help you get ready for the festive period ahead.

Budgeting is an essential tool in managing finances. You can track your income and expenses, save money, and achieve goals. 

Getting a mortgage when you are self-employed can be tricky, but it certainly isn’t impossible.

There isn’t such a thing as a “self-employed mortgage” - you will be applying for the same mortgages as anyone else. The main difference is you will be required to provide more evidence of a reliable income.

Stress-Busting Tips

25 Oct 2023

We have written a short blog of some stress busting ideas that you may want to put into practice, whether you're in the process of buying a property, or not, you may find these tips and techniques helpful.

Why have interest rates been increasing? when will they go down? And what does this mean for you?

We have created this short guide to provide self-care tips to support your physical and mental health.

Selling up? It’s important to make your house as appealing as possible to potential buyers. Good decorating can help with first impressions, and increase the perceived value of your property.