Halifax Intermediaries has begun accepting remortgage applications from mortgage prisoners under new FCA rules, but it will only lend up to 75 per cent loan-to-value.

In an email to brokers, the bank says it will now consider switching applications under the regulator’s new modified affordability assessment measures.

These can be used to help borrowers who are classed as mortgage prisoners by the regulator because they are trapped on home loans with closed-book lenders and unable to switch because of affordability rules.

Until now, these borrowers have been prevented from moving onto cheaper deals with other lenders because they could not pass the tougher affordability assessments imposed by lenders following the last financial crisis.

Such borrowers have also been unable to move onto a better rate with their current lender because closed-book providers do not offer product transfers.

Customers who are classed as mortgage prisoners should receive a letter from their existing lender referring them to the Money Advice Service website which has further information and a basic eligibility tool.

It says: “If a remortgage application for a customer classed as a mortgage prisoner passes our standard affordability assessment then the application can proceed as normal and not under the new mortgage prisoner scheme.

“If the application does not meet our standard affordability assessment but the customer is up to date with their mortgage payments we can still consider a remortgage subject to our standard criteria, credit scoring and passing an alternative affordability assessment at a reduced stress rate. 

“Our mortgage prisoner form will be added to our website ‘literature’ page, this explains our process and will need to be completed for all applications. 

“We will also require a copy of the letter from the customer’s existing lender confirming they are a mortgage prisoner.”

Halifax says that the Money Advice Service website has a list of brokers who have expressed an interest in supporting these customers, but it will accept applications from all the intermediaries it works with. 

Qualifying mortgage prisoners will have access to the lender’s standard remortgage range

In order to apply the modified affordability assessment:

• The customer must be remortgaging from a closed book lender and have received a letter from their existing lender stating they are classed as a mortgage prisoner
• The remortgage is of the customer’s main residence with no additional borrowing (excluding any fees e.g. mortgage release/discharge fees included in their existing mortgage balance or new product fee to be added). 
• The remortgage cannot include any additional borrowing to repay any other debts secured on the property. 
• The maximum loan is the amount required to repay the existing first charge mortgage balance only.
• The LTV will be capped at 75 per cent.

The lender will consider interest-only cases where there is a viable repayment plan.

Halifax says the borrower’s new monthly payment must be no more than 5 per cent higher than the current monthly payment.

Borrowers with shared equity or shared ownership mortgages will not be eligible for the scheme, nor will it accept customers who are in financial difficulty according to the definition set out on the criteria page of its website.

Customers who are looking to add or remove a borrower from the mortgage as part of the switching process would need to meet the criteria for a standard remortgage as they are not eligible for a modified affordability assessment.