MSE News: Urgent warning: EU remortgage rules could create mortgage prisoners 29 April 2015 at 9:21AM in Mortgages & Endowments 4 replies 2.2K views

Former_MSE_Helen

MoneySavingExpert.com explains how new EU rules could affect you if you're looking to remortgage...

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Urgent warning: EU remortgage rules could create mortgage prisoners




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Let_Us_See

Is this really news?

Whilst I agree refusing to transfer a client to a lower rate of interest due to affordability, and therefore ensuring a higher monthly mortgage payment, is an oxymoron. However, lenders exist to make a profit, and an applicant is made aware their initial rate will revert to the SVR with no guarantee of a product switch prior to submitting the original application.

Some lenders seek to retain their clients with a product transfer, whilst others don't.

MatPhil_2

Hello


Could someone please help with a clarification on this article?
I am on a 10 year mortgage with a 2 year fixed period which reverts to standard variable after two years.
I have asked the lender whether I would be able to move on to a cheaper tracker rate in 2 year times without a new affordability check in 2 years time. They said yes I can move to the best available tracker at that time for my LTV. They were not aware of this new EU rule.


I any event they said technically changing the rate is not the same thing as remortgaging. Remortgaging means taking a new loan to refinance and old one. So it seems this rule should only affect people looking for a new loan and not people changing rates on an existing mortgage. Do you agree with this?


This article can be very misleading if they don't clarify this point.


I look forward to hearing your thoughts.


Best regards

Thrugelmir

MatPhil wrote: »

They were not aware of this new EU rule.

Nothing will happen until 2016. UK mortgage markets are now among the best regulated in Europe. So I wouldn't get worked up about the EU directive.

The MMR was the result of poor lending practice not the EU directive.

ellendexter

I'm really confused and worried about this. We have an offset, interest only mortgage, currently 75%LTV. We are due to come off our fixed rate and onto an SVR in the summer. We want to stay with our current lender - 1st Direct - there's little choice for an interest only, offset mortgage anyway. But we want to go onto another fix as it'll be a lot cheaper. We have done substantial building work, so after a revaluation, our LTV should now be sub 60% instead of 75%. Our problem is that our monthly household income has drastically reduced (it's now less than a quarter what it was when we got the mortgage two years ago) and we wouldn't pass the old criteria now let alone the new. We are just affording the interest payments from our income at the moment, and obviously over time we have plans to increase our income (e.g. get a second income when little one starts school etc but that's not going to be for another couple of years yet). To get to the point.... Will our current lender (bizarrely) turn us down for a cheaper deal on the basis that the rules say we can't afford it - i.e.mortgage prisoners - even though we're not changing lender? Or worse case, could they invoke some obscure small print rule and recall the loan? Or perhaps force us to change to a more expensive repayment product once they are alerted to our low income? I'm too scared to ask them for advice because of what could possibly happen once they are alerted to our changed situation . Thank you.