A new research report has claimed that 50% of mortgage-holders are likely to be crippled if the changes suggested by the Financial Services Authority (FSA) are allowed to proceed.
This prediction states that 5.5 million homeowners will be turned into ‘mortgage prisoners’, meaning they will not be able to remortgage their present mortgage offer or be able to get a home loan.
The report was published last week by the Council of Mortgage Lenders (CML) saying that approximately 50% of the 11.4 million mortgage holders in the UK are likely to be affected.
It states that 20% (about 2.2 million people) will find that they are effectively ‘excluded’ from the mortgages available, because the mortgage they currently hold would not have been granted to them under the suggested new FSA rules.
Another 30% (about 3.4 million) would be able to borrow a figure lower than they already have on a mortgage, meaning when their current deal ends, for instance a fixed rate or discounted rate, they would be unable to get another mortgage elsewhere.
The new proposals make changes that are potentially explosive, as described by the Daily Mail. They will drastically alter whether or not someone can be accepted for a mortgage, for how much and what sort of deal they could have.
The CML’s Michael Coogan described the proposed rules as:
‘an over-reaction to past problems’
He went on to warn:
‘As a consequence, (lenders) will not lend to as broad a range of potential customers.’