While it may seem hard to believe, the main principle underpinning the current situation is a sensible one, as it's rooted in more responsible lending ultimately to protect customers from getting into unmanageable debt.
After the financial crash in 2008, mortgage lending rules were tightened. Suddenly homeowners, who successfully applied for and were granted mortgages under the old rules, now didn't pass under the new ones. So when they tried to switch to new lenders – even if they were up-to-date with all their payments – the tighter rules prevented them from doing so.
To make matters worse, the majority of these homeowners had mortgages with Northern Rock and Bradford & Bingley. After these lenders collapsed and were taken over by the Government, their loan books were sold on to unregulated entities, for example, private equity firms that became de facto mortgage providers EVEN though they were not authorised to lend or provide services or other products – these are also known as "closed-book" firms.
Regulated, active lenders can offer new deals without going through a standard affordability assessment, but the closure of the lender – and the subsequent sale of the mortgage book – meant that customers didn't have the option of a new deal.
So unless they happened to meet the tougher affordability rules and could switch elsewhere, these homeowners were now trapped on their lenders' reversion rates – often referred to as standard variable rates or SVRs – which are what most borrowers end up on after the end of an incentive period such as a two-year fix or two-year discounted variable rate.
But they're often expensive. Usually homeowners remortgage to another deal to avoid paying over the odds. This is not an option for mortgage prisoners who typically end up paying £1,000s – and occasionally even £10,000s – more every year than similar mortgage customers with mainstream lenders.