Britain’s 30,000 ‘mortgage prisoners’

AROUND 30,000 borrowers who took out loans before the financial crisis are trapped in poor value deals and barred from switching.

These so-called ‘mortgage prisoners’ cannot get cheaper deals because they have been hit by stricter lending rules introduced after the collapse of Northern Rock bank.

Two-thirds of these borrowers are stuck with lenders who are no longer taking on new customers, according to the report by City watchdog the Financial Conduct Authority. They are likely to include customers hit by a clampdown on lending into old age by banks, tougher affordability checks and limits on interest-only deals.

The FCA now wants to make it easier for customers to switch. The watchdog said it was considering industry-wide plans to encourage banks to allow mortgage prisoners to switch to cheaper deals.

But it also found three in ten customers who are able to switch mortgage deals were failing to move to the best deals. They were typically overpaying by £550 a year.