The Financial Services Consumer Panel warned mortgage customers could be charged a higher interest rate because they are unable to move their deal elsewhere, with more borrowers facing this "acute" risk when new rules tightening up on mortgage lending come into place.
Fears have been raised of a "ticking time bomb" of people on interest-only deals who may find themselves unable to remortgage, while more than a million borrowers have also been hit by a recent spate of lenders announcing mortgage rate increases.
The panel is a statutory body that advises the Financial Services Authority (FSA), which is clamping down on irresponsible lending and making sure borrowers can only take out mortgages they can afford. It suggested that the FSA may need to delay its plans in order to allow the housing market to recover.
The FSA's Mortgage Market Review (MMR) proposals, published last December, will place new rules around mortgage advice and income will have to be verified in every application, with lenders placing greater emphasis on other regular outgoings.
But the panel said a new rule should be introduced which would ensure "mortgage prisoners" are not unfairly treated or discriminated against because they are unable to take out other, more competitive mortgages, due to a lack of equity for example.
It said: "The risk of being charged a higher interest rate because a consumer is unable to move their mortgage elsewhere is particularly acute.
"This applies both to borrowers who are already trapped, because they do not meet current tightened lending criteria, and those who may be trapped in the future following implementation of the MMR.
"We suggest a specific rule to ensure that consumers impacted by the transitional arrangements are not unfairly treated or discriminated against by reason of their inability to access alternative, more competitive mortgage products."
The FSA does not plan to implement the proposals before the summer of 2013, but it has said that if there is widespread support for particular plans, it may put some aspects in place sooner.