MPOWERED announced that it will no longer provide new mortgages, sparking fears that customers may become locked in expensive loans.
Brokers have suggested the move could result in borrowers becoming ‘mortgage prisoners’.
The firm, which has lent £1.3 billion, closed new applications on October 28 to allow MQube, its fintech parent company, to “expand, digitalise, automate and accelerate mortgage origination across new markets.”
It’s currently unclear if MPowered’s decision is temporary or permanent, but it has sparked concern among mortgage experts and brokers.
EHF Mortgages managing director Justin Moy told The Sun: “The number of borrowers with MPowered will be small, but the lack of options to move over at a new rate at the end of the current deal could create a pocket of mortgage prisoners, so it is important to work with your broker to ensure you are in a good position to remortgage.”
A mortgage prisoner is a homeowner who is unable to switch to a new mortgage deal, even though they are up to date with their payments.
The issue unfolds when the borrower no longer meets the affordability or lending criteria set by banks and building societies, as they’ve demonstrated they can manage their existing mortgage.
This then means they become “imprisoned” on their current deal, which is usually one with a much higher interest rate, without the ability to jump to a more competitive or flexible product.
Mr Moy explained that borrowers won’t know they are trapped until they come to the end of their deal and cannot remortgage elsewhere.
MPowered was recognised as the largest non-bank lender in the prime residential mortgage market in 2024.
Karen Barnett, founder and chief executive of Unbiased told The Sun: “When a lender withdraws from the market, it can understandably create uncertainty for homeowners who may be wondering what it means for their own deal.
“But the mortgage market is constantly shifting, with providers entering and exiting all the time — so it’s important not to panic.”
She explained that the real risk of becoming a mortgage prisoner is when borrowers leave it too late to explore their options.
“Seeking early advice from a whole-of-market professional gives people the best chance to secure a new deal that fits their circumstances.”
A spokesperson for MPowered said: “Throughout this transition, borrowers, intermediaries, and distribution partners can continue to expect the same high level of service and support that has defined MPowered from the start.
“We will no longer offer Product Transfers and would encourage brokers to look to find their customers a new suitable offering as/when they approach the end of their fixed rate period.
“Where this isn’t possible, we will work with the customers on an individual basis to find a solution, so where possible, they avoid going on to SVR at the end of the fixed period.”
When quizzed on the topic of mortgage prisoners, MPowered told us: “We’ll do what’s right for our customers as per our regulatory obligations and ethical standards, that includes supporting customers who need it throughout our transition and protecting against mortgage prisoners.”
Lock in new deals
This comes as homeowners with expiring mortgages have been urged to lock in new deals ahead of the Budget after major lenders slashed rates.
Santander, NatWest, Barclays and HSBC have all cut their rates in the past week, sparking a mortgage price war.
On Monday, Santander cut its fixed rates for homebuyers and people remortgaging by up to 0.36%.
NatWest cut its deals by 0.21% this week, while HSBC and Barclays have also cut rates.
Most of the deals that have been cut are two-year fixes, with Barclays cutting its lowest two-year fixed rate from 3.92% to 3.86%.
HSBC also cut its lowest two-year fix for someone remortgaging from 3.99% to 3.92%.
NatWest is currently offering the cheapest two-year fix at 3.77% – down from 3.94%.
It’s available at up to 60 per cent loan-to-value (LTV), with a £1,495 fee.
Mortgage brokers have hailed the news “welcome relief” for borrowers, but urged them to lock down deals ahead of Rachel Reeves’ Budget next month.
Jack Tutton, Director at Fareham-based SJ Mortgages, said borrowers should act now ahead of the Budget on November 26.
“Lenders are ramping up the rate war ahead of the budget to gain market share before the Chancellor makes her announcements,” he told The Sun.
“All of which is great news for homeowners whose mortgage deal is coming to an end in the next six months.
“As it’s been for a while, it’s still best to secure a new deal at your earliest opportunity, providing the lender will consider changing your product should the market improve.
“This gives you a worst-case scenario for your mortgage moving forward, plus it protects you should the budget have a negative impact to our financial markets.”
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
