The Government must act now to free 250,000 mortgage prisoners - Greg Wright

They are honest, hard-working people who find themselves locked in a cell of financial despair through no fault of their own.

The consumer champion Martin Lewis and The Yorkshire Post have long been calling for decisive action to ease the prisoners’ plight.

Mortgage prisoners are trapped with their current lenders, which are often inactive or not authorised to offer new products, leaving many paying higher rates than they would otherwise need to.

They are often rejected when they apply for cheaper mortgages because they do not meet toughened borrowing criteria brought in after the 2008 financial crash, even if they are keeping up with repayments.

A new report on mortgage prisoners has been published by the London School of Economics and Political Science (LSE).

The research was commissioned by MoneySavingExpert.com, which Mr Lewis founded, and was also funded by a personal donation from him.

To quote Mr Lewis: “Mortgage prisoners are the forgotten victims of the 2008 financial crash.”

“There is a moral responsibility to release money to free mortgage prisoners from their penury. I was delighted when Treasury Minister John Glen agreed in advance to review any policy proposals the LSE came up with.

“The independent, practical solutions in this report leave no excuse for not tackling this, though as an urgent first step, the Government must agree to do the remedial work, using critical data it has access to, to cost the solutions up fully.”

The report makes bleak reading. The LSE found mortgage prisoners are up to 40% more likely than other borrowers to default due to coronavirus.

The research also concluded that mortgage prisoners are more likely than the average borrower to have general debt problems.

Many mortgage prisoners have also told MoneySavingExpert of the extreme emotional and physical burdens caused by the situation they have been left in.

MoneySavingExpert and the LSE are calling on the Government to urgently use data on all UK borrowers to accurately calculate the costs of these proposed policy measures.

Potential solutions could include offering interest-free Government equity loans to bring down some borrowers’ loan-to-value ratios so they can re-mortgage.

There could also be mortgage rescue initiatives, allowing those whose mortgages are financially unsustainable to remain in their homes as tenants, while the property is sold to housing associations with a buy-back option later.

The LSE also believes that borrowers must be provided with more information about their loans and protections. They should also be signposted to debt counselling and advice.

Kath Scanlon, distinguished policy fellow at LSE London, said: ““We hope our work contributes to a long-lasting solution for these borrowers.”

A Treasury spokeswoman stressed that thousands of borrowers will find it easier to switch to an active lender or continue interest-only payments, due to recent rule changes by the Financial Conduct Authority.

The spokesman added: “We have been working closely with the industry to ensure more is done to help those who are eligible to switch. We remain committed to looking for practical new solutions for borrowers who are struggling.”

However, further action is surely needed as a matter of urgency

Rachel Neale, a spokesman from the UK Mortgage Prisoners group said: “It is now time to find a fair and ethical solution for all mortgage prisoners.”

Ms Neale said the report places the issue at the Treasury’s door.

She added: “John Glen must act to help people trapped for over a decade.”

The report, which has been written by some of the finest minds, provides the Government with a road map out of this crisis. Our political leaders have a moral obligation to take it.

No civilised society can ignore the mortgage prisoners’ private agony.

Support The Yorkshire Post and become a subscriber today. Your subscription will help us to continue to bring quality news to the people of Yorkshire. In return, you'll see fewer ads on site, get free access to our app and receive exclusive members-only offers. Click here to subscribe.