These forgotten victims of the financial crisis will have been incensed by the revelation that regulators may have underestimated the numbers of people who are trapped into paying above the odds, just to keep a roof over their heads.
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.
Earlier this year, MPs voted to reverse attempts to provide help for tens of thousands of mortgage prisoners.
The House of Lords had amended the Financial Services Bill to require the regulator to introduce an interest rate cap for households who have been affected. It would also have ensured access to fixed-rate deals, in some cases. However, MPs voted by 355 votes to 271, to remove this amendment from the Bill.
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.”
The Treasury, has, however, offered some hope to Britain’s mortgage prisoners by ordering the Financial Conduct Authority to provide further detail on the characteristics of mortgage prisoners. The FCA is reviewing and updating its data to consider the demographic and loan characteristics of mortgage prisoners.
In a statement, the FCA said: “We believe that our July 2020 assumptions led to a low estimate of the number of customers who have mortgages with inactive firms and are unable to switch despite being up to date with payments.
“In the review we will take a fresh look at all the assumptions we made to establish the numbers of people who are able and unable to switch, including the criteria for whether an individual can switch.”
Rachel Neale, from the UK Mortgage Prisoners group, said: “I am very upset that the FCA have now stated that they have been using assumed figures for the past few years rather than actual figures to establish the amount of mortgage prisoners.
“This review can only be taken seriously if the FCA and the Treasury look at mortgage prisoners broadly instead of continuing to try to create a narrative that leads to blame. I am fed up with talking about the problem. They have not taken up one of the solutions put forward.”
MoneySavingExpert.com (MSE) and its founder Martin Lewis have campaigned for years for more help for those who are unable to remortgage. Last year, a report on mortgage prisoners was 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.
MoneySavingExpert and the LSE are calling on the Government to urgently use data on all UK borrowers to accurately calculate the costs of 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.
Campaigners estimate that Britain has 250,000 mortgage prisoners, more than a decade after the crash. This figure is an indictment of Governments which have failed to launch a decisive intervention to liberate them from these crippling arrangements.
We need less conversation and more action. The LSE report provides a route out of this crisis. There is no excuse for dither and delay.
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