Mortgage Solutions obtained data from the Financial Conduct Authority (FCA) through a Freedom of Information (FOI) request that showed that between June 2021 and the first half of 2024, the number of accounts held by closed-book lenders fell by more than 50,000 to 143,000.
The FCA has not collected data on how many of these closed-book borrowers include mortgage prisoners since its review in 2021, which found there were 47,000 within the wider population of 195,000 closed-book borrowers.
The regulator defines a mortgage prisoner as a borrower who is up to date with payments and unable to switch to a new mortgage deal, either with a new lender or their existing lender, and could benefit from switching, but has characteristics outside of a lender’s appetite.
The FCA introduced amended affordability assessments enabling closed-book borrowers to switch to an active lender in 2019. Based on information collected for the regulator’s product sales data, 16,474 closed-book borrowers remortgaged to an active lender between 2021 and 2024.
This leaves around 33,500 closed book borrowers who are no longer on firms’ accounts but were not recorded as remortgaging to an active lender.
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Closed-book lenders running borrowers off their books
Rachel Neale, campaigner at UK Mortgage Prisoners, said in her view, closed-book lenders had become “far more ruthless” in their efforts to get people out of their properties.
Neale said these lenders offered limited help, but did not always give borrowers enough time to organise themselves or seek advice from a broker.
Neale suggested that court backlogs caused by the moratorium on possessions brought in during the pandemic may also be prompting firms to avoid delays by starting proceedings early, compounding the lack of time for borrowers to seek support.
Jill Hulme, campaigner at UK Mortgage Prisoners, said some borrowers were also being forced to sell.
A spokesperson for the FCA said: “We understand the challenges faced by borrowers who are unable to switch mortgages. We’ve taken all steps within our powers to support them and have set clear expectations for firms to help customers in financial difficulty.
“Repossession must always be a last resort. Lenders should exhaust all reasonable options before taking this step and must treat consumers in vulnerable circumstances fairly.”
Feeling hopeless
Hulme said members of UK Mortgage Prisoners did not regularly engage with advisers or lenders as they felt they could not be helped, but when someone did manage to speak with a broker, it turned into a “scramble” for their details.
The regulator brought out a directory to connect mortgage prisoners to advisers who could guide them, but a follow-up article from Mortgage Solutions found that some advisers were unaware they were on the list, while others assisted fewer than 10 affected people.
Jason Foord, director of Verifi Mortgages and an adviser who has recently dealt with mortgage prisoners, said he did not believe that lenders actively pushed for repossession, but also did not feel they gave “enough genuine support” to mortgage prisoners either.
He added: “At best, they may extend the term by a few months, but that doesn’t address the root problem, which is borrowers stuck on an interest-only loan without a repayment vehicle. In reality, many end up with only two options: sell their home or face repossession.
“What lenders should be doing is proactively reviewing these cases and offering a structured path to capital repayment earlier, rather than waiting until borrowers hit crisis point. That way, balances can start reducing sooner and few homeowners end up trapped.”
The challenge with expiring interest-only deals
Hulme said the high number of interest-only mortgages coming to the end of their terms had escalated things.
The most recent figures from UK Finance showed that at the end of 2024, there were 541,000 pure interest-only and 174,000 part and part interest-only mortgages outstanding – annual declines of 18.5% and 13% respectively.
Foord identified a “pattern” among clients who took out an interest-only loan when it was easier to do so, and “lenders did not really press for a repayment vehicle at the time of the application”.
He added that at the time, it was “really easy” to get a mortgage and there was less concern about the “end game”.
UK Finance has continued to say a significant number of possessions relate to older mortgages that have been in arrears for some time.
Now these borrowers are getting closer to retirement, have lower incomes and have no repayment strategy, lenders are not prepared to extend terms to allow for capital repayment options, particularly where it does not fit maximum age criteria or there are credit issues, Foord said.
He added: “I had one case recently where a client had been on interest-only for the entirety of the mortgage term. He was also mis-sold an individual voluntary agreement (IVA) a few years back, thinking it was just a simple debt management plan. His current term was coming to an end, and he was unable to extend that term or change this to a repayment option due to age, affordability and changing any term on a product transfer requires a new credit check, so he was stuck, and repossession was on the table.
“I managed to find a specialist lender that may take his IVA, but this means he will be required to work until the age of 80 to ensure the mortgage is affordable, and the rate was as a high street lender’s standard variable rate (SVR).”
Neale is one borrower who has managed to refinance onto an active lender – however, she is unable to take out additional borrowing to renovate her property because her credit rating is impaired.
She said, despite having a “decent income”, historical credit blips were still showing on her file even after refinancing away from the closed-book lender at least three years ago.
Neale said: “I’m still being turned down on even the smallest amount to be able to improve my property. That’s another hidden thing that still keeps you trapped in the cycle. I’ve never missed a payment, that’s what I should be judged on.”
Neale said some closed-book borrowers who switched to a new deal now had to start again and take a 30-year term to meet affordability or lose their homes.
She said it was “bittersweet” for these borrowers because they would still be impacted by their impaired credit for more years to come.
Few fair outcomes for borrowers
Closed-book borrowers in financial difficulty should be entitled to the same forbearance as borrowers in the open market, but for those in serious arrears, it may be in their best interest to sell the property.
Firms must also give borrowers a reasonable time to sell when a payment arrangement cannot be made, and borrowers are able to raise complaints with the firm or the Financial Ombudsman Service (FOS) for free.
Consumer Duty was applied to closed-book lenders in July 2024, a year after the rules were implemented for open products and services.
Despite this, Hulme said closed-book lenders did not seem to be following guidance and said the organisation was “not seeing any fair outcomes” for borrowers.
Neale said UK Mortgage Prisoners had a positive record working in the interest of both the borrower and the closed-book lender, but felt like the organisation was seen as “part of the problem by keeping that person in the property”.
Hulme said mortgage accounts were sold to closed-book providers to run the books down, adding: “They’ve got no intention to try and get people to stay [on their books].”
She also said that when interest rates were rising, closed-book lenders had taken the opportunity to apply each increase to borrowing costs.
“We were already struggling to pay 4% or 5% when everyone was on 0.1%, but now people are on anything up to 10%. Where it was difficult for 10 or 11 years, the last three or four years have been harder for everybody,” Hulme said.
Hulme said the industry and regulators should put pressure on the government for legislative change. She said a new mortgage was not the answer, there needed to be something “niche” to allow mortgage prisoners to stay in their homes, as the government “put them in this position”.
The Mortgage Prisoners Inquiry Bill, intended to establish what led to the creation of mortgage prisoners and the consequences, is currently working its way through Parliament.
