Government must stop banks from selling loan books to vulture funds, says influential group of MPs

THE Government must prevent all banks from selling their loan books to unregulated “vulture” funds, according to the co-chairman of an influential group of MPs.
Kevin Hollinrake MPKevin Hollinrake MP
Kevin Hollinrake MP

Kevin Hollinrake of the All Party Parliamentary Group on Fair Business Banking (APPG), made the comments after the publication of the latest data related to mortgage prisoners.

Last year, the APPG estimated that there are around 200,000 mortgage prisoners across the UK who are trapped with inactive and unregulated lenders and are unable to take advantage of historically low interest rates.

Hide Ad
Hide Ad

The mortgage prisoners are trapped into paying higher rates of interest to their borrower because they cannot meet affordability tests, brought in after the financial crisis, despite making payments on their current, higher interest rate mortgage.

This has caused problems for borrowers who have found their debt sold on to unregulated private equity firms that do not offer new mortgages or more affordable rates.

Mr Hollinrake said: "It is deeply cynical to laud your Corporate Social Responsibility policies and then refuse to implement guidance from the regulator. It appears that some banks seem determined to evade their clear responsibilities to be good citizens.

"We call on the Government to intervene to force banks to do the right thing and to prevent any bank from selling off their loan books in future to unregulated vulture funds."

Hide Ad
Hide Ad

Responding to these comments, a UK Finance spokesman said ”UK Finance is committed to working with members, the FCA and government to help find solutions that assist customers with mortgages provided by firms that are no longer active in the market.

The spokesman added: “The FCA has made it possible for customers transferring their mortgage from one lender to another to avoid the need for the detailed assessment required for new lending, where they are not looking to borrow any more money and are up to date with payments. It is helpful that the FCA has published the data and this will allow lenders to consider the needs of this group carefully and develop products that meet their needs.

”Customers of inactive lenders and firms not authorised for new mortgage lending will be contacted by their mortgage administrator later this year to inform them of this change.

”UK Finance, together with other industry bodies, is working closely with the FCA to develop sources of information to help customers check if they are able to secure a new mortgage deal under the revised criteria.

Hide Ad
Hide Ad

“We would also encourage customers to contact the Money Advice and Pensions Service who can provide free and impartial advice. Depending on their circumstances, customers may opt to see an independent mortgage broker.”

A Treasury spokesperson said: “We know that being unable to switch your mortgage can be stressful.

“That’s why we’ve introduced rules that make it easier for some customers to switch. We now want to see more people offered these new deals and have been working closely with banks on this important matter.”