Do you think you're a mortgage prisoner? We've put together some frequently asked questions to help you understand more.
No, the affordability assessment used when you took out your mortgage was under the same stricter rules used today. It is likely you are struggling to re-mortgage because of a change in your circumstances, for example, your income might be lower or perhaps your outgoings have increased.
The rules became stricter, which means you may have passed the affordability test when you first got your mortgage prior to 2014 and you may not now.
The affordability test considers whether you will be able to afford the monthly payments in the future. It is not based on whether you can afford the payments at the fixed interest rate you may originally start on. It will look at the lenders current variable rate and add an extra 3% to take into consideration future rises in the interest rate. The test will assess whether you can afford the monthly payment at this ‘stressed’ future interest rate.
For example. If the initial rate was fixed for 2 years at 2%, and the variable rate was 3.5%, your affordability would be tested at 6.5%. 3% more than the variable rate of 3.5%.
For an average £200,000 mortgage over 25 years, the test will look at whether you could afford monthly payments of approximately £1,351 instead of the £842 you may be required to pay in the fixed rate period.
Yes, the rules were put in place by the FCA to make sure mortgage payments continued to be affordable if interest rates were to rise.
No, mortgage lenders can only help those who are up to date with all their mortgage payments and have been for the last 12 months.
If you are struggling with your mortgage payments, please contact us on 0333 300 0920 Monday to Friday between 9am and 5:30pm, so we can be sure we are providing you with the right support. You can also get free impartial advice from an independent organisation or charity.
No, criteria will vary from mortgage lender to mortgage lender, which is why it is helpful to speak to an independent mortgage adviser who has access to a range of different mortgage lenders. Visit www.unbiased.co.uk for a list of mortgage advisers.