Let mortgage prisoners borrow more, says AMI

The Association of Mortgage Intermediaries says mortgage prisoners should be allowed additional borrowing of up to 10% as long as it is in their best interests.

The Mortgage Market Review states lenders can waive some of the regulator’s affordability rules for mortgage prisoners – for example, borrowers in negative equity or those who have self-certified – only if it means no additional borrowing or higher monthly payments.

But AMI director Robert Sinclair wants the FSA to allow these individuals to borrow up to an additional 10%.

He says: “If a consumer wants to move to a fixed rate mortgage to ensure greater certainty about their expenditure, even if it means an increase to their monthly repayments, it may be in their best interests to do so.

“There may be circumstances where a small amount of additional borrowing is needed to make a house move viable, such as to cover Stamp Duty and estate agent and removal costs.”

Sinclair adds: “Such flexibility should be left for the lender to determine as part of its lending policy but we would consider a 10% tolerance on both the additional borrowing and the monthly cost of borrowing to be a reasonable amount.”

He says the scale of the mortgage prisoners problem will only be fully exposed when the base rate rises and consumers try to switch mortgages.