Campaigners, including the consumer champion Martin Lewis, have called for action to support the UK’s mortgage prisoners, who are trapped with their current lenders, which are often inactive or not authorised to offer new products. As a result, many of the “prisoners” are 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.
Mortgage Prisoners said they are feeling “disappointed, distressed, and betrayed” after MPs voted to reverse a measure that could have eased their plight.
The House of Lords had amended the Financial Services Bill to require the regulator to introduce an interest rate cap for affected households. It would also have ensured access to fixed-rate deals, in some cases.
However MPs voted by 355 votes to 271, to remove the amendment from the Bill, despite powerful representations on the mortgage prisoners’ behalf.
Conservative MP Kevin Hollinrake (Thirsk and Malton) pressed for the Government to offer more support.
He told the debate: “ It is the government of the day’s responsibility to solve this because this was a problem of a government’s making, indeed a Conservative government’s making – a coalition government – so we’re absolutely duty bound to find a solution here.”
Speaking in the Commons, Treasury minister John Glen said he takes the issue “extremely seriously” but added: “I am afraid that the Government cannot accept this amendment.
“We must continue to be guided by the facts and the evidence. And the FCA’s (Financial Conduct Authority) analysis shows that half of the 250,000 borrowers with inactive firms meet the normal risk appetite of lenders and could therefore switch if they chose to without any Government intervention.”
He later added: “Of those remaining 125,000 who cannot switch, 70,000 are in arrears and therefore many would not be able to secure a new deal even if they were in the active market.
“And these borrowers need to work with their lenders to agree an appropriate repayment plan. The remaining 55,000 who are within active lenders and are up to date with their payments but who cannot switch are paying on average only 0.4% points more than similar borrowers on reversion rates with active lenders.”
Mr Glen confirmed he is “ready to engage” on the issue.
He added: “I will commit to continue dialogue to try and find a way forward, those are not empty words.”
A spokesman said the Treasury will work with the FCA on a review of their existing data on mortgage prisoners "to ensure we have further detail on the characteristics of those borrowers who have mortgages with inactive firms and who are unable to switch, despite being up to date with their mortgage payments".
The FCA will also review the effect of its recent interventions to remove regulatory barriers to switching for mortgage prisoners and will report on this by the end of November.
The Treasury will use the results of this review to establish whether there are any further possible solutions that can be found for these borrowers that are practical and proportionate, the spokesman said.
In a statement, the UK Mortgage Prisoners’ group said the vote marked a continued failure to put right the inaction of successive Governments, “which saw us pay for the iniquity of regulated banks in 2008, hiking our interest rates, and then selling off our homes to foreign and domestic vulture funds”.
The spokesman said: “This is a measure that would have provided immediate relief and significantly changed the lives of mortgage prisoners who have faced over a decade of financial and emotional misery.”
The ball is now firmly in the Government’s court. Many families are at breaking point.
To quote one parent, who is a mortgage prisoner with a young daughter: “ She never asks for much but I feel I fail her all the time due to the financial hell I am living in.”
Another mortgage prisoner said: “My children have had to live with the stress of our financial situation since they were born.”
Mr Glen must set up a task force to provide a speedy mechanism to ease the financial strain faced by mortgage prisoners.
The Government must also provide mental health support to families who are paying an appalling price for the banks’ follies, 13 years after the world was rocked by the financial crash.
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