At a glance
A mortgage prisoner is a homeowner who is unable to switch to a cheaper mortgage deal.
They became trapped on expensive deals after stricter affordability rules were introduced following the 2008 financial crisis.
Their mortgage is likely to be held with an inactive or ‘closed book’ lender.
Help is available for some mortgage prisoners.
Why are people trapped in expensive mortgages?
Some homeowners, known as ‘mortgage prisoners’, have found themselves trapped in pricey mortgage deals since lending rules were tightened in 2014.
These borrowers are stuck paying high interest rates and unable to switch to a better deal, even if they’ve never missed a payment. Most have mortgages with inactive lenders who no longer provide new loan products.
But there is support available. The Financial Conduct Authority (FCA) has updated its affordability rules, which could help some people release themselves from uncompetitive rates.
Am I a mortgage prisoner?
You could be a mortgage prisoner if you:
Bought or remortgaged your home before 2014
Have been told in the past you can't switch to a cheaper mortgage deal
Have received a letter from your lender saying you’re classed as a mortgage prisoner.
How did affordability checks change after the financial crisis?
In response to the 2008 financial crisis, the FCA introduced strict new lending criteria for homeowners. This included a ‘stress test’, which forced lenders to assess whether potential borrowers would cope financially if interest rates were to rise by up to 3%.
The point of these rules was to prevent another financial crash by stopping people taking out mortgages they might struggle to afford. But it also meant that, through no fault of their own, many people who were previously accepted for a mortgage would no longer pass affordability checks.
Most mortgage prisoners are stuck on a standard variable rate (SVR) mortgage. This is what you’re automatically moved onto once your introductory or fixed-rate deal ends, unless you remortgage. They’re often paying hundreds of pounds a year more than they would if they were able to switch to a more competitive deal.
However, mortgage rules have slowly been relaxed since 2019, which means that some borrowers may now find it easier to remortgage.
What is a ‘closed book’ mortgage?
Most mortgage prisoners are also ‘closed book’ customers. This means they’re borrowing from a lender that is no longer active and not authorised to offer new mortgage products.
This includes people who took out mortgages with the likes of Northern Rock and Bradford & Bingley, which collapsed during the financial crisis. Their mortgage books were sold to inactive lenders or unregulated firms which often charge high rates of interest.
The FCA’s Mortgage Prisoner Review found that around 195,000 borrowers have mortgages held by closed book lenders. Of these, it only considers around 47,000 to be true mortgage prisoners who are unable to switch. The rest may have options open to them.
What help is available for mortgage prisoners?
The FCA has removed some of the barriers that stop homeowners who are not strictly ‘imprisoned’ from finding cheaper mortgage deals. While the rule changes won’t help everyone stuck with expensive mortgages, there is more flexibility than before.
If you’re unfairly trapped in your mortgage, you could potentially:
Switch to a new lender
Lenders now have the option to use a ‘modified affordability assessment’, which waives some of the strict checks. This means that some homeowners who were previously trapped on expensive deals have been freed. But the policy is optional, so not all lenders are offering new deals to mortgage prisoners.
Under the modified rules, you can be released from SVR deals if you:
Have been up to date with your mortgage payments for at least 12 months
Have at least five years left to run on the mortgage
Have a remaining mortgage of at least £50,000
Have a loan-to-value (the ratio of the loan amount to the value of your home) of no more than 85%
Are planning to stay in your current property
Have no plans to take out other loans.
Which lenders help mortgage prisoners?
Several UK lenders use the modified affordability assessment to help eligible mortgage prisoners remortgage onto better deals. These include: NatWest, Halifax, West Bromwich Building Society and United Trust Bank.
Ask to switch to a better deal with your current lender
You might be able to apply for a product transfer if your lender offers new mortgages. This would allow you to swap your existing deal for a cheaper one with the same provider, but you'll need to be up to date with your repayments.
Seek advice first as you might be able to get an even better deal by switching providers if this option is open to you.
Switch to a provider that is part of the same group as your lender
FCA regulations allow borrowers in closed books to switch to a mortgage with an active lender within the same financial group as their existing lender.
A mortgage broker can help you work out if your lender is part of a wider group that offers new products. But even if they are, there’s no guarantee a related provider will accept you as a customer. Eligibility still depends on the lender’s criteria.
What to do if you’re a mortgage prisoner and can’t switch
If you’re not able to switch to a new deal right now, there are still things you can do to improve your chances of releasing yourself from the mortgage trap in future.
Overpay on your mortgage
If you can afford it, gradually overpaying your mortgage can:
Increase your equity (the portion of the property you own from paying off your mortgage)
Reduce the overall interest you pay
Shorten the length of your mortgage.
Talk to your lender to find out how much you’re allowed to overpay without being charged.
Reduce other debts and expenses
Lenders look at your overall debt when assessing mortgage applications. So, reducing credit card and loan balances can improve your chances of passing affordability checks.
Take stock of all your regular payments, like gym memberships and phone bills, and consider whether you could switch to cheaper contracts. You could even compare and switch your home insurance and broadband.
Speak to a mortgage broker
Brokers who have experience of helping mortgage prisoners know which lenders offer flexible solutions or use the FCA's modified affordability rules. Many won’t charge for their services. If they do, you should be told about any fees upfront.
Your home could be repossessed if you don't keep up repayments on your mortgage.
FAQs
What if I have an interest-only mortgage?
If you’re on an interest-only mortgage – which was a popular form of lending before the financial crash – you may still be able to benefit from the relaxed affordability rules. But lenders will expect you to provide proof that you have a plan to repay the outstanding mortgage at the end of its term.
What does it mean to have negative equity?
Negative equity means that the value of your home is lower than the amount still to pay on your mortgage. This puts homeowners in a difficult position when it comes to selling and remortgaging their home.
If a homeowner is unable to remortgage at the end of their mortgage deal, it’s likely they’ll be moved on to their current lender’s SVR. This will typically be more expensive, making it even more difficult for mortgage prisoners to escape negative equity.
If I’m behind with my mortgage payments, am I a mortgage prisoner?
The FCA has made it clear that homeowners who are behind with their payments are not classed as mortgage prisoners. It defines mortgage prisoners as borrowers who are unable to move to a new mortgage deal, despite being up to date with their payments and potentially benefitting from switching.
Where can mortgage prisoners get support?
UK Mortgage Prisoners is a support group for people trapped in their current deals. It campaigns to highlight what it calls the unfair treatment of mortgage prisoners and continues to lobby the government to change the law.
If you’re finding it difficult to pay your mortgage, talk to your lender or contact Citizens Advice, StepChange or National Debtline for free advice.
Looking for something else?
With over 10 years’ experience writing, editing and managing content, Emma has written and edited for some of Australia’s leading financial comparison brands, including Savings.com.au, Your Investment Property Magazine, and Your Mortgage.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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