Property is indeed a promising business. All people will always need a place to stay or live, as this is one of their primary needs. The number of lands that becomes decrease from time to time makes the value of the land and building on it become much higher. Therefore, many companies try to make a profit from it. However, the previous financial crisis hit the industry so hard, which made some drastic change. Unfortunately, the effect mostly affects the customer.
In the UK, the case of “mortgage prisoners” because of that event has come into surface. More than 150,000 people need help from the debt and weight of their previous mortgage loan. The high-interest rate that property industry applies after the financial crisis is the main culprit here. With the sudden increase, those mortgagors’ finance unable to survive, and this led to a more financial problem that they never expected. This never-ending circle move around and around and turn them into a prisoner of their debt.
According to Financial Conduct Authority (FCA), the problem even worst after they decide to switch to the “reversion rates” option after the previous loan rate expired. In order to keep their mortgage, these people did it. However, the new rate has a more expensive fee, which gives them another problem. And, the worst of all, these people can’t switch it to other option, because the requirement that is too difficult to fulfill. In the end, they won’t be able to get out of this situation, which makes the term “mortgage prisoners” was born.
Christopher Woolard, FCA Director of Strategy and Competition said the market condition is actually good. There are many people that keep their obligation to pay their loan. However, the chance to deal with the new mortgage is the real problem here. He added that a new tool is needed here, for helping these consumers. The FCA has tried to make an agreement with the industry to create an application form for those consumers who have always kept their payment. This way they have another chance to find a solution or new mortgage loan.
However, the FCA stated that that method only capable of helping 30,000 of them. The remaining 120,000 mortgage prisoners are those who don’t use the firm that has no right to give a loan or use the batch mortgage system. Therefore, FCA hopes the regulator also involves in this matter and creates a law that can help the rest of them.