Up to 40% of homeowners with mortgages could be unable to move home because they would not qualify for a new loan, according to analysis by mortgage experts. The growing band of so-called 'mortgage prisoners' is thought to number as many as four million, BBC News has learned.
The problem stems from stricter checks on mortgage applicants introduced a year ago by the Financial Conduct Authority (FCA). Many lenders are applying the rules rigidly, despite transitional provisions allowing banks to show flexibility if existing customers want to move or remortgage without increasing their borrowing. As a result, some people are trapped in their current mortgage deal or forced to pay much more.
Siobhan Moloughney, from Bath, told the BBC: 'They've pulled the rug from under me and I'm stuck.' She had a home and a steady job but ended up back with her parents after her lender refused to transfer her portable mortgage. She said she had proved she could afford the mortgage and trusted the company, but was refused after an affordability check on her income and outgoings, despite having a clean repayment record and unchanged earnings.
Ray Boulger of mortgage brokers John Charcol calculated that up to 40% of residential mortgage holders could be affected. 'People who have a perfectly good track record on their current mortgage and don't want to borrow more money are finding they are being refused because of these new rules and the way they are being interpreted,' he said. Matthew Whittaker from the Resolution Foundation suggested that between 35% and 40% could be hit.
Homeowners with interest-only mortgages, the self-employed, and those deemed too old to borrow are also at risk. Chris Baytopp, 59, from Hertfordshire, lost out heavily when moving because of his age. His mortgage provider refused to transfer a portable fixed-rate deal, so he had to pay £4,000 in early redemption fees to switch to a new lender. 'I'm angry,' he said. 'Affordability isn't an issue with me.'
The Council of Mortgage Lenders said stricter treatment could be justified, but Pat Bunton of the Association of Mortgage Intermediaries argued that large numbers of prime customers were being unfairly trapped. Paul Smee of the CML acknowledged that if there were glitches, the industry must find ways around them.
