The true number of mortgage prisoners may be up to 100,000 – vastly more than official figures – says Hargraves Lansdown personal finance analyst Sarah Coles.
Yesterday, the Financial Conduct Authority (FCA) issued a report on mortgage prisoners.
Among its figures, it stated that of the 195,000 mortgages in closed books with inactive firms, there are currently 47,000 whose borrowers are classed as mortgage prisoners.
The report centred around a request for lenders to amend their borrower criteria to assist more mortgage prisoners who are close to their risk appetite.
Hargraves Lansdown argues that the FCA figure does not include borrowers who missed payments or are near the end of their term, which puts the real number of prisoners at “closer to 99,000”.
The firm estimates that 34,000 people of the 195,000 total have missed payments and 18,000 are within two years of the end of their mortgage deal or have less than £10,000 outstanding.
Coles says: “Prisoners are trapped in a vicious circle. They’re often paying a far higher interest rate than everyone else, and while the average rate of 4.3% is bad enough, 3% of them are paying over 5%.
“It means they’re completely focused on making ends meet, so tackling their underlying problems becomes a Herculean task. If every penny is going on your existing mortgage, it’s harder to pay down a big outstanding interest-only balance.
“Likewise, if it absorbs a major chunk of your income, you run the risk of missing payments. And both of these things make you more likely to remain a prisoner for even longer.
“As more time passes, your problems don’t get smaller, but you get older. Almost twice as many people with inactive lenders are over the age of 56 (35.3%), and almost four times as many are aged 76 or over (2.1%). Having big outstanding balances at a later age makes the task of finding an alternative to switch to even harder.”