What is a mortgage prisoner and is help available?
Image source: Getty Images  The 2008 financial crisis might be a hazy memory for most of the population, but mortgage prisoners are still paying the price. We take a look at what the term mortgage prisoner means and what you can do if youre affected. A mortgage prisoner is someone who cannot switch to a new mortgage deal. The predominant reason for this is that their lender was taken over by the government and no longer exists. These homeowners are also unable to move their mortgages because they dont meet the stricter lending rules introduced after the financial crisis. The result is that these homeowners are quite literally trapped. Not only are they paying mortgages with relatively high interest rates, but theres also little opportunity to find a more affordable alternative. Plot your path towards financial freedom with our Heros Journey tool! MyWalletHero is here to help you learn about taking control of your money, whether thats paying off debt, working towards a short-term money goal, or investing for your future. This tool can help you understand the next steps on your journey  simply choose a goal that best describes your current interests to get started. The Financial Conduct Authority (FCA) estimate there are around 250,000 mortgage prisoners in the UK. The FCA found that 57% of mortgage prisoners had an interest-only or mixed repayment mortgage. Nearly half (47%) owed more than 100,000. Figures also revealed that 63% of those trapped by their mortgages had a remaining term of more than 10 years. The FCAs figures show that more than a quarter (35%) of mortgage prisoners were paying interest of less than 3%, meaning theyre unlikely to get a more competitive deal. However, a large proportion of prisoners were less fortunate. Around 17% were actually paying more than 5% interest on their mortgage rates. Everyone else was somewhere between 3% and 5%. In the grand scheme of things, the number of people trapped by mortgages is relatively small. But for those stuck paying more than they have to, with no end in sight, its a burden that can have knock-on effects. Thats particularly so for anyone that cannot switch because of tougher lending rules. In some cases, the FCA discovered borrowers had a poor credit history at the time they took out their mortgage. For borrowers that fall into this group, theres a greater chance of becoming house poor and more financially vulnerable generally. This is particularly the case as food prices could also be set to rise. Crucially, although nearly all of those affected took out mortgages just before the 2008 crisis, the FCA warns that its a situation that could happen again for different reasons. The FCA has amended lending rules to help anyone who couldnt switch providers because of stricter post-2008 regulations. This also includes mortgage prisoners. Lenders can now use a modified affordability assessment. This revised assessment is designed to make it easier for people to switch to a more affordable mortgage. To be considered under the modified rules, you should:  Have a current mortgage  Be up to date with your loan repayments and not have any missed payments in the last 12 months  Not want to borrow any more money other than what you need to finance your home  Be looking for a new deal for your existing home  On top of this, the FCA has asked lenders to check their books and contact affected customers. If mortgage providers use the modified assessment, they must tell you how your affordability has been assessed. They should also let you know of any financial risk to you. Youll need to bear in mind that lenders arent obliged to use this new framework. For more information and guidance about these changes, head to the FCAs website. Most recently, there was a move by the House of Lords to cap standard variable rates for mortgage prisoners as part of the Financial Services Act 2021. However, this was rejected by the House of Commons. So, while changes have been implemented to help those trapped, theres still a way to go until everyone is free. Yes No  4 iron-clad rules for saving money on everything Our Editor Sam Robson has been on a personal cost-cutting mission for years  and its time to share his wisdom. Check out his choicest saving tips and tricks in this free report, Sams 4 Iron-Clad Rules For Saving Money On Everything. Just enter your email below for instant access to your free copy. Click here! About the author Anne East Anne specialises in personal finance and insurance products, covering the ins and outs that enable consumers to make informed financial choices based on the facts.