Mortgage prisoners: Government working to 'carefully consider proposals' after Martin Lewis claims it made £2.4bn

MoneySavingEpert (MSE) claims this has left many paying increasingly higher rates, and has meant they are often rejected when they apply for cheaper mortgages, as they do not meet borrowing criteria brought in around 2014 after the financial crash – even if they are keeping up with repayments.

The report, conducted by the London School of Economics and Political Science, claims that The Government made £2.4bn from the sale of these loans, on top of making back the cost of managing the sales.

The Government noted that it made a number of interventions as a result of the financial crisis to protect the economy, ordinary savers and businesses, adding: “It is right that the government seeks to maximise value for money for taxpayers as it exits the interventions made as a result of the financial crisis and the proceeds from these sales go towards supporting the wider public finances.”

MSE stated that in 2009, the Government acknowledged that selling these mortgages to inactive lenders had the potential to severely harm consumers, but didn't take action to prevent this.

Martin Lewis said: "This report lays out starkly that the state sold these borrowers into poverty, knowing it could cause them harm, and made billions doing it.

“The result has destroyed lives. People have been left in financial, physical and mental misery, exacerbated by the pandemic and cost of living crisis ripping through their already dire situations.”

MSE claims that In the past year, near-monthly rate rises have seen some people’s rates leap from 4.5 per cent to as much as 8.29 per cent. Groups representing mortgage prisoners also told MSE that some have even taken their own lives.

A HM Treasury spokesperson said: “We have already taken steps with the Financial Conduct Authority to update mortgage lending rules, removing the barrier that prevented some mortgage prisoners from being able to switch.

“We are open to further practical and proportionate solutions to help mortgage prisoners, working with the Financial Conduct Authority and industry to carefully consider all proposals put forward.”

The new report, which has been submitted to the Treasury and the Financial Conduct Authority, sets out a series of costed solutions to the problems facing those whose mortgages had been sold.

The report proposes free comprehensive financial advice, paid for by The Government, for all “mortgage prisoners”, stating that borrowers should be contacted individually to access this advice, including help with debt, benefits and income. It also proposes a fallback option, consisting of a guarantee from The Government to offer “mortgage prisoners” new mortgages.

The Government noted that whilst it remains open to proposals for help, the pricing and availability of mortgages is a commercial decision for lenders in which the government does not intervene.