Our mortgage prisoner proposition

Our mortgage prisoner proposition

Our proposition supports borrowers who might have become trapped (also known as a ‘mortgage prisoner’) with their existing closed-book lender and have received a letter confirming that they’re a mortgage prisoner for the following reasons:

  • The lender is no longer providing new mortgages or offering existing borrowers with an alternative rate at the end of their product offer period.
  • And the borrower is unable to switch to a more affordable mortgage because of the way lenders assess affordability.

What you need to know

We’ll apply standard policy, and applications will be subject to our standard credit score and underwriter approval for mortgage prisoner clients with the following exceptions:

  • No further borrowing is allowed (other than any relevant fees associated with the new mortgage or to consolidate one or more secured loans).
  • Secured loans can be consolidated where they are regulated and secured on a property (either the mortgage or secured loan should be with a closed book lender).
  • Early repayment charges aren’t considered in the affordability process and can’t be considered as part of the new mortgage as it would be an increase in the amount to be borrowed.
  • Income verification won’t be needed.

Use our calculator to check whether your client meets the eligibility requirements for the modified affordability assessment and mortgage prisoner products.

Who is eligible?

If your client has become trapped with their current lender and has received a letter confirming they’re a mortgage prisoner, in line with regulatory changes, we can change the way we assess affordability of a mortgage. We can offer a product range developed to support mortgage applications using the modified affordability assessment if your client:

  • Has a current mortgage (residential owner occupied only).
  • Is up to date with their mortgage payments (this includes where payments were deferred due to the impacts of COVID-19, and have not been treated as a shortfall, has no arrears or missed payments within the last 12 months on all secured borrowing that would form part of the mortgage).
  • Is looking to remortgage to a new product on their current property.
  • Doesn’t want to borrow any more money above the value of their current main residential mortgage (including any fees).
  • Maximum loan to value is 85%.
  • The loan is to be repaid by the applicant’s 75th birthday (70th birthday for interest only or part & part).
  • Standard residential policy applies to all qualifying modified affordability customers except for the specified rules defined for these customers.
  • Modified affordability can’t be applied when converting a capital and interest loan to interest only.

Useful tools

Read our mortgage prisoner guide Use modified affordability calculator

Our modified assessment of affordability

Our modified affordability assessment differs from our usual assessment as we’re not required to review your client’s income and expenditure to decide if they can afford the new mortgage payments and future mortgage payments if interest rates were to rise.

We’ll also determine that the interest rate of a proposed new mortgage during any product offer period (or if there’s no product offer period, across the whole mortgage term), is lower than the interest rate that your client is currently paying, which isn’t part of our usual assessment. And that the new rate is less than what is paid by your client over the past 12 months on their current mortgage.

Important information

Your client will be eligible for the mortgage prisoner proposition if when comparing the affordability, the new mortgage is deemed ‘more affordable’ during any product offer period (or if there’s no product offer period, across the whole mortgage term) if:

  • The total expected cost of the proposed new mortgage, including any fees, is less then your client would have paid on their current mortgage over that period of time.
  • The typical monthly payment of the new mortgage is less than your client paid over the past 12 months under their current mortgage.
  • The interest rate of the new mortgage is lower than your client is paying on their current mortgage.

As a responsible lender, we think it’s important that your client considers the benefits of maintaining their current mortgage payments where their new payment is lower, and understand that by doing so, it reduces the length of their mortgage and reduces the amount of interest they pay. Therefore reducing the total cost of their mortgage.