A group representing Britain’s mortgage prisoners is calling on the Government to launch a public inquiry into the sale of mortgages to non-regulated lenders.
Campaigners, including Jayne Emsley from Pontefract, would like the Government to expand the Financial Conduct Authority’s remit to cover unregulated purchasers of mortgages.
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 particular 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.
Ms Emsley from Pontefract, West Yorkshire, took out a mortgage with Northern Rock in 2006. Northern Rock was nationalised at the height of the financial crisis in 2008 and held by a Government body known as UK Asset Resolution (UKAR). The sale of its assets to Cerberus for £13.3bn in 2015 was the biggest of its kind by the UK Government.
Ms Emsley, who had originally taken out a five year tracker mortgage with Northern Rock in 2006, said her mortgage payments doubled overnight in 2011.
She said: “I tried to re-borrow at a better rate but, despite my exemplary record, and years of hard work, we were told ‘no’.
“The rules had changed all of a sudden. Since then our life has been a series of knock backs not of our making.
“We are paying through the nose for a mortgage we are trapped in because a bank got into trouble.”
“We pay our bills on time every time. I have never missed a mortgage payment. I struggle so much to feed my family some weeks, never mind treats of any kind. I dread Christmas every year.”
Campaigners are calling on the Government to find a solution for mortgage prisoners who have been financially disadvantaged.
Ms Emsley added: “There are so many variants to the mortgage prisoner, but a sensible mortgagee who took sensible advice about a mortgage and followed that advice should be put back in a position that they would have been in prior to the collapse of Northern Rock.
“We would also like to stop all future sales to non regulated entities.”
An HM Treasury spokesperson said: “We know that being unable to change your mortgage can be a difficult and stressful situation.
“That’s why we’re working closely with the FCA to remove barriers, including changing lending rules that will put any customers that are up to date with their payments in a better position when looking to remortgage.
“When selling mortgage assets we engage fully with active lenders as part of the process and have always required bidders to agree to a full set of customer protections. This is before their bids are considered on price and other factors.”
UK Asset Resolution (UKAR) requires buyers to agree to a non-negotiable package of customer protections when submitting a bid, the Treasury spokesman said.
These protections are part of the sale agreements, and include adherence to the FCA’s principles of treating customers fairly, and that the mortgages are serviced by an FCA-regulated servicer.
The spokesman said: “UKAR invited the top 25 active lenders to participate in the latest £4.9 billion asset sale, but did not receive a bid from any of them that covered the full portfolio of assets. Likewise, active lenders have been invited to participate in all UKAR sales, but have never submitted a bid for the full portfolio of assets.”
Selling UK Asset Resoluton (UKAR) assets to active lenders does not necessarily guarantee that customers would be able to access new products, the Treasury spokesman said.
The spokesman added: “The government welcomes the Financial Conduct Authority’s (FCA) recent announcement to change the affordability assessment from an absolute test to a relative one.”
The FCA have now published a consultation paper on the changes to affordability assessments, the spokesman added.
The Financial Conduct Authority is the conduct regulator for 58.000 financial services firms.