The Ipswich Building Society has launched six new remortgaging products specifically aimed at freeing 'mortgage prisoners' from their current deals.
The lender has said that it won't 'stress test' applicants for these new mortgages, making it easier for those trapped in expensive deals to pass affordability checks.
This move, along with upcoming sector-wide regulation changes, could help mortgage prisoners save thousands of pounds a year.
We take a look at Ipswich Building Society's new remortgaging deals to see what kind of difference they could make.
Thousands of borrowers across the country became mortgage prisoners when the Financial Conduct Authority (FCA) introduced strict affordability checks in 2014 to clamp down on irresponsible lending.
Although they were designed with good intentions, the changes meant that many people who were granted mortgages before 2014 became trapped in their current deals, unable to remortgage because they can't pass the new, stricter tests - even if they've made all their payments on time and are not asking to borrow additional funds.
Last year, Which? research into remortgaging found that homeowners on SVRs could save almost £4,000 a year if they switched to an equivalent deal.
The Ipswich's new product range aims to help mortgage prisoners remortgage by bypassing the affordability 'stress test' which was introduced in 2014.
Stress tests were put in place as a risk-minimising measure. They check whether a borrower would still be able to afford their mortgage repayments if their interest rate was to rise significantly.
With these six new products, the Ipswich Building Society will simply check that customers can make repayments at the introductory rate and SVR advertised, rather than at a higher, stressed rate.
You'll also need to borrow at 4.5 times your income or less, and you can't make big changes such as switching from interest-only to repayment, extending the mortgage term, or putting the mortgage in someone else's name.
|2-year discount rate||Society's SVR (currently 5.74%) minus 3.19%||5.5%|
|2-year fixed rate||2.8%||5.3%|
|2-year discount rate||Society's SVR minus 3.24%||5.4%|
|2-year fixed rate||2.75%||5.3%|
|2-year fixed rate||3.25%||5.4%|
|Exclusive 2-year fixed rate||3.15%||5.4%|
The removal of stress tests may well help some mortgage prisoners.
At the moment, a borrower on an SVR of 5% who has made every one of their payments might be told that they 'can't afford' to remortgage to an equivalent deal at 3% - which, obviously, is even more affordable - because of a stress test that adds 5-6% to that rate.
There are, however, other reasons people are trapped - and this range of mortgages will not help everyone.
If you were given an before 2014, you may not have been required to have a credible repayment plan in place. If you don't have a repayment plan, your best option is to remortgage to a . But for all the usual reasons, this can be tough for mortgage prisoners.
Since Ipswich's new range doesn't let you switch from interest-only to repayment, it won't lead to freedom for everyone.
Ipswich is using flexibility in the current regulations to bypass stress tests, but the FCA has also announced proposals to help mortgage prisoners by making the rules less strict.
While the final changes will not be announced until the end of the year, the gist is that lenders will be allowed to use their own judgment to give borrowers modified affordability assessments if needed.
In June, the All-Party Parliamentary Group on Mortgage Prisoners launched an inquiry to look into the issue further, with the aim of making sure mortgage prisoners are treated fairly.
The group secured a House of Commons debate on mortgage prisoners, which saw many MPs agreeing that work needs to be done to help these vulnerable customers.