Mortgage prisoners are facing 'tsunami of repossessions and forced sales', says campaign group

Some mortgage prisoners have been trapped on high rates since the 2008 financial crisis. Borrowers entered into loans with lenders that subsequently failed and they have often been rejected when applying for cheaper mortgages because they do not meet toughened borrowing criteria brought in following the crisis.

Many have loans that were sold by the state to “closed book” inactive lenders, often investment companies that are not regulated to lend new mortgages, making it difficult for them to move to cheaper rates.

In a statement, the UK Mortgage Prisoners Action Group said: “We are witnessing an influx of families losing their homes through repossessions and forced sales.”

The group is calling on the Government to ban the ownership of mortgage books by inactive lenders who do not operate lending licences or offer new products.

It is urging the Government to help facilitate the transfer of mortgages to active lenders at a discount “that reflects the tens of thousands of pounds of payments mortgage prisoners have overpaid in the years since 2008”.

The group is also calling for a review of the FCA (Financial Conduct Authority’s) definition of what constitutes a mortgage prisoner.

Last year, the consumer champion Martin Lewis urged the Conservative Government to find “any and all solutions” to free mortgage prisoners. A report, funded by a private donation by Mr Lewis, proposed solutions to help borrowers eventually remortgage with active lenders.

Yesterday, the action group said: “As millions of families with access to mainstream products are going on their summer holidays, mortgage prisoners are stuck on interest rates approaching 10 per cent and many are losing their homes daily.

The group said that increasing interest rates had pushed SVRs (Standard Variable Rates) these borrowers are trapped on to between 9 and 13 per cent, “allowing for widespread profiteering at the expense of working families”.

It added: “Interest only borrowers now coming to end of term are locked out of options and face losing their homes.

"They have been demonised for taking a product commonly sold and promoted pre regulatory change and have been trapped since the 2008 crash and unable to switch mortgage type..

“The new Government has an opportunity to stop the ongoing harm and to reset borrowers’ relationships with the mortgage market. Whilst there is a need for a full public inquiry, this is not the priority today. Today, we need to stop the haemorrhaging of money and homes. We need immediate action.”

A HM Treasury spokesperson said: “We recognise the challenge that mortgage borrowers who are unable to switch to a new mortgage deal face, which is why we will work with regulators and the industry to ensure this issue is properly considered."

The Economic Secretary to the Treasury Tulip Siddiq is due to meet with the mortgage prisoners campaign group to discuss these issues after Parliament’s summer recess.