A constructive meeting between the UK Mortgage Prisoners action group and the Financial Conduct Authority has raised hopes that this 14-year saga might be about to enter its final chapter.
However, warm sentiments are never enough. 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.
The Treasury has 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 meeting with the FCA, the Mortgage Prisoners’ Action group stressed that the review must seek to help all cohorts of mortgage prisoners and “cannot focus on the previous narrative which centred around identifying borrower (risk) characteristics and shifting blame from the Government”.
Rachel Neale, the group’s spokesperson, said: “Branding mortgage prisoners in this way serves only to shift blame from the Government so help can be withheld.
“Until the FCA identifies how many mortgage prisoners there are trapped and unable to switch then the true extent of the problem and the harm it is causing remains unknown, for us and the Government.”
This situation can only have been exacerbated due to the pandemic, which will have resulted in payment holidays, missed payments, arrears and redundancies.
Ms Neale added: “We no longer have the luxury of developing a ‘one size fits all’ solution; the 14 years of mismanagement and neglect now mean most mortgage prisoners are trapped for a multitude of reasons and not just one.
“UK Mortgage Prisoners are as aware as anyone that this is a difficult problem to solve,” she added. “Nevertheless, it’s a problem that was created by consecutive governments and one that collectively needs to be resolved as a matter of urgency.”
The time for blaming and shaming borrowers has long since passed, according to Ms Neale, especially when children’s lives could be ruined.
A recent Mortgage Prisoners’ report highlighted the silent pressures being placed on children who are growing up in a household under intense financial strain.
It uncovered “concerning information” about anxiety, depression, and self-harm, relating to children as young as 10 years old.
A Treasury spokesperson has said that many borrowers could now find it easier to switch to an active lender thanks to recent rule changes by the Financial Conduct Authority.
The Treasury has pledged to work with the FCA to review the effectiveness of these changes “and establish whether there are any further possible solutions that can be found for these borrowers that are practical and proportionate”.
The FCA will 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,
But here’s one proportionate solution, proposed by the Mortgage Prisoners, which might work.
There should be scope to create a dedicated, Government guaranteed mortgage product which is available only to mortgage prisoners. This product could be similar to existing Government-backed mortgage guarantee schemes for first-time buyers and would allow borrowers to re-enter the active mortgage market.
These constructive proposals must be taken off flip charts and become part of new legislation.