Financial Conduct Authority must stop shameful exploitation of 200,000 mortgage prisoners by unregulated funds - Greg Wright

The appalling mistreatment of mortgage prisoners must rank among the biggest scandals of our time.

Around 200,000 people – including frontline NHS workers who have risked their lives during the pandemic – have been forced to pay over the odds to keep a roof over their heads.

Mortgage prisoners are consumers who are trapped in their current deal, often with an inactive or unregulated lender. They are often vulnerable people and could be stuck with a lender who will exploit them by forcing them to pay a much higher interest rate than the market average.

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The All Party Parliamentary Group on Mortgage Prisoners (APPG) has written to the Competition and Markets Authority and the Financial Conduct Authority (FCA) to call for an immediate investigation into “price gouging” by unregulated funds and inactive lenders.

The plight of mortgage prisoners is a national scandal, according to Greg Wright

One victim said: “This is a true David versus Goliath. We all have a mortgage holiday but that only kicks the can down the road. They will be chomping at the bit to get repossessions started again.

“Look, we all know we have to pay...but not be ripped off by unregulated debt collectors in the guise of mortgage companies that can’t lend or won’t lend.”

The APPG is calling for a market wide margin cap of 2 per cent above the Bank of England base rate on all mortgage standard variable rates. Such a move would provide immediate and effective relief to hundreds of thousands of homeowners who have been trapped on crippling interest rates for more than a decade.

A similar market intervention was made to protect consumers from “price gouging” by energy companies, and the APPG believes that the case for intervention in the mortgage market is even more pressing, as the extra costs to any mortgage holder on a SVR could run into thousands of pounds every year.

The recent survey by UK Mortgage Prisoners highlighted the “catastrophic personal consequences” that these rates are having on key workers.

To quote the APPG: “It is time that we say enough is enough and take clear, decisive action to alleviate the ongoing harm that is being inflicted on key workers and other mortgage holders across the country. We cannot applaud their service on the one hand, while allowing this level of injustice to continue with the other.”

Rachel Neale, of the campaigning group UK Mortgage Prisoners, said: “UK mortgage prisoners have been asking for help for more than two years.

“People are already writing to tell me that they won’t be able to afford the repayments being asked of them after their mortgage holiday has finished.

“This will lead to arrears and ultimately repossessions. There must be a cap and the Treasury must extend the regulatory perimeter so that legislation allows the FCA to bring in the correct protections. The stories I’m receiving are heartbreaking and devastating.”

The FCA confirmed it has received the APPG’s letter and will respond. The CMA said it welcomes information about market practices and considers issues that are brought to its attention. The Treasury has introduced rules that make it easier for some customers to change provider.

It has said it wants to see more people offered these new deals and it has been working with the sector to achieve this objective. In March, the Treasury introduced a three-month mortgage holiday for those struggling with their finances as a result of the pandemic, and at least 1.7 million borrowers have benefited.

However, further action is needed. Mortgage prisoners should have the same rights as other citizens who can escape from punitive SVRs by switching to lower fixed rate deals.

As Martin Lewis, the founder of MoneySavingExpert.com, observed, the cost associated with mortgage prisoners doesn’t just fall on the individuals, it falls across society.

A mortgage prisoner said on Twitter: “Lockdown is easing. Not for us though. Not until these bars come down.”

The activities of these unregulated funds must be revealed in plain sight. They should be forced to appear before MPs to explain why they have caused misery on such a vast scale.