In normal circumstances, if you are unhappy with a rate, service or the terms of your mortgage deal, you would have the option to apply to switch to a new lender or transfer to a different product (while you can do it in the middle of the deal, there are hefty charges for doing so, so you typically have to wait until your deal ends).
But if you're a mortgage prisoner, the new stricter affordability rules mean you're stuck with whatever terms, rates or service your existing lender offers you. This can result in years (some have been trapped for over a decade) of sky-high rates with no option but to pay – or lose your home.
Here's an example: - Nelly isn't a mortgage prisoner. She owns 25% of the equity in her home and has a £150,000 loan. She has access to a two-year fixed-rate at 5%, amounting to £877/month. If she remortgaged to similar deals over the lifetime of her 25-year mortgage, the total interest at the end would come to £113,000.
- Mark is a mortgage prisoner. He has the same amount of equity as the above example. But he ends up paying £1,108/month on a rate of 7.5%, which he's stuck on. The total interest after 25 years would come to £183,000.
Result. £183,000 (Mark Mortgage Prisoner) - £113,000 (Nelly Not-a-Mortgage-Prisoner) = £70,000. This means Mark Mortgage Prisoner could end up paying significantly more interest compared to Nelly Not-a-Mortgage-Prisoner during the lifetime of the mortgage.