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Mortgage Prison - Release Date Unknown

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Thisismoney (can't link) has an article from 8th june on mortgage prisoners. It is very bearish and some off the stats are draw dropping. Looks like someone has stolen the housing ladder !

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Ian Cowie has an article on the same theme in the telegraph!


Bank of England base rate remaining frozen at 0.5pc for two years and three months after today’s announcement will bring no comfort to a third of homebuyers who are ‘mortgage prisoners’ because of stricter new lending criteria and falling house prices.

They cannot move home to follow work or accommodate larger families because financial regulators are forcing banks and building societies to ‘shut the stable door after the horse has bolted’.

New rules imposed after these homebuyers arranged their original mortgages mean they are not allowed to carry them over to buy a new property – or, in the jargon, ‘port’ the loan. So, they must either pay early redemption penalties, usually between 3pc and 5pc of loan value and

running into thousands of pounds, or stay where they are.

Independent experts say this unintended consequence of more cautious lending practice since the credit crisis will delay any recovery in the housing market – and could cause a double dip in house prices.

Melanie Bien, a director of mortgage broker Private Finance, said: “There is a growing number of mortgage prisoners, who no longer meet their lender’s original or current criteria.

“It is terribly unfair that existing customers are being penalised. The biggest problems for those porting are reductions in maximum loan-to-values, tightened affordability criteria or reduced income multiples, and changes to the lender’s treatment of bonuses.

“Another issue for those porting is changes to interest-only criteria with most lenders reducing maximum LTVs on interest-only to no more than 75pc.”

Examples of major lenders who have moved the goalposts include Halifax – which used to lend up to 85pc on an interest-only basis but reduced this to 75pc LTV from April 6, 2011, to bring it into line with the rest of the Lloyds Banking Group. Similarly, Nationwide Building

Society capped interest-only lending at no more than 75pc LTV from early April this year.

Ray Boulger of John Charcol mortgage brokers said: “With the Financial Services Authority (FSA) now accepting that some of its original lending proposals, particularly those relating to interest-only and a maximum 25 year term for affordability calculations, are not appropriate, those lenders which have changed their criteria to reflect the FSA proposals need to have a rapid rethink.

“Around a third of existing mortgage borrowers are mortgage prisoners, either because they have insufficient equity or savings to allow them to get a new mortgage or because they can no longer meet any lenders’ criteria.”

Traditional standard variable rate (SVR) mortgage borrowers are least likely to be affected because these mortgages do not apply early redemption penalties. This demonstrates a risk in long term fixed rates and discounted deals which have become increasingly popular in

recent years.

David Hollingworth of London & Country Mortgages pointed out: “Only a few years ago, the government suggested there should be more long term fixed rate mortgages in the British market to reduce the exposure of homeowners to volatility in interest rates.

“The arguments against locking into a deal for too long remain the same today. If you need to review the mortgage arrangement at some point, because of a home move for example, then the ability to shop around is restricted by any early repayment charge.

“There never was a guarantee that the lender would be able to satisfy any new, increased borrowing requirement but with the tightening of criteria in recent years the problems have been brought into sharp relief.”

While a fixed rate offers borrowers certainty about future mortgage costs, it is important to remember that the borrower’s own circumstances and requirements may change over time – in which case, fixed terms can prove uncomfortably restrictive. So borrowers need to beware that an attractive deal today could prevent them moving tomorrow

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Mate of mine has 5 BTLs, spread between N.Ireland and Eire. One was valued at the peak at £400K but can't now be sold at £200K. My mate has a good job and can cover the mortgage payments but is stuck.

I did warn him around 4 years ago that this would happen but got the "you rental sucker" look that many of us know well.

Another person I know has 5-6 BTLs but has suddenly moved out of his own home (big & cold) into one of this BTL to save on costs. He is asking double the going rate for the rental on his place so I dont think that is going to work out.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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