A recent report from leading credit researcher Moody’s shows that mortgages taken out in 2006 and 2007 contain the highest amount of mortgage prisoners.
If you borrowed before this period, then you may well have been aided by house price increases lowering your loan-to-value. LTV is the percentage of the value of the property that you borrowed (£300k loan on a £400k house is an LTV of 75%).
Mortgages lent in 2006 and 2007 however have not benefited from the same increases in property value. According to Moody’s, a mortgage prisoner is either a borrower at 85% LTV or more who is behind on their payments; or someone with an interest-only loan at 100% LTV or more.
Mortgage prisoners find it difficult to remortgage. In fact a quarter of subprime borrowers are now unable to refinance their home loans at all.
‘Subprime’ refers to borrowers whom lenders expect may have trouble keeping up with mortgage payments. Subprime borrowers have weakened credit histories and lending to them is deemed a greater risk.
It is a sad situation when people who have had previous credit issues are being penalised for mistakes, and the movement of the market has not helped them. If anything, this does go to show the importance of keeping up payment on existing credit commitments.
If you need expert advice on remortgaging, do not hesitate to contact Limetree Financial Services.