Santander will accept applications from mortgage prisoners from today following guidance published by the Financial Conduct Authority.

This is open to all registered intermediaries if their client has received a letter from a third party administrator on behalf of the FCA identifying them as a mortgage prisoner. Mortgage administrators must contact eligible customers by 1 December 2020.

Research by the FCA in January 2020 found that 170,000 borrowers, with mortgages in closed books or owned by unregulated entities, were up-to-date with payments and could be eligible to switch.

As with all borrowers, applications from mortgage prisoners will be subject to an affordability assessment.

Santander will consider cases that have failed standard like-for-like remortgage affordability assessment/loan to income policy and failed standard LTV policy. It will also allow some light adverse credit outside of its existing policy.

Types of cases Santander will not consider include current or recent mortgage arrears, significant adverse credit and cases with additional borrowing.

There are also LTV restrictions on capital and repayment loans over 90 per cent, interest-only mortgages over 70 per cent and part and part loans over 85 per cent. Interest-only mortgages must have an established repayment vehicle.

Santander will not lend if the affordability assessment fails due to the reversion rate. It says that a higher level of affordability coverage will usually be required to allow for potential increases in rates to ensure sustainability.

A dedicated team has been set up to review and manage these cases.