Seema Malhotra and Charlie Elphicke: Action needed to help 'mortgage prisoners'
The new All-Party Parliamentary Group on Mortgage Prisoners will campaign to ensure that all who are trapped on expensive deals offered a way out, say founding members Seema Malhotra MP and Charlie Elphicke MP.
Mortgage prisoners are still suffering the consequences of the financial crisis – with thousands stuck paying high interest rates.
A mortgage prisoner is someone unable to switch mortgage lender. They are vulnerable and could be stuck with a lender which will exploit them by keeping them paying a high interest rate, not give them any new deals or fixed rates and not show them any flexibility.
There are up to 200,000 people who are currently mortgage prisoners. This includes over 120,000 former customers of Northern Rock who were sold off by the Government and UK Asset Resolution (UKAR). In 2016, Lord McFall wrote to the Government, UKAR and the FCA to express concern about the lack of safeguards for the mortgages being sold. Instead of listening to these concerns, the mortgages of thousands of former Northern Rock customers were sold to unregulated lenders and vulture funds.
Over the past few months we have heard from mortgage prisoners, including those from the mortgage prisoners Facebook group, who told us about the serious financial and psychological impact they had suffered. They have paid thousands of pounds more in interest and some face losing their homes, leading to stress, ill-health, depression, relationship breakdown and damage to their businesses and credit records. More than anything, they told us about how frustrating it is to be paying 5% or 6% and be told that you cannot “afford” a mortgage which would halve your interest rate and reduce your mortgage payment significantly.
Without further action by the FCA, the Government and UK Asset Resolution, many mortgage prisoners face a worrying future. There is no way for many of them to gain any certainty over their mortgage payments by accessing new deals or fixed interest rates. The prospect of rising interest rates highlights the urgency of achieving further improvements.
The Treasury and UK Asset Resolution should not be selling to unregulated lenders and vulture funds. They should have a duty to sell to active lenders which are willing and able to give them new deals and fixed interest rates.
The FCA has published proposals to reform the affordability test, but it is concerning that banks will not be forced to apply it for customers trying to switch. There is also the worry that when time is of the essence, unregulated lenders like Cerberus might not have to tell their customers about this new escape route until 2021. Our first inquiry will seek to review the FCA proposals and make a contribution to the consultation which ends later in June.
Last week, a new 10 Minute Rule bill was presented to Parliament by Charlie Elphicke MP which would help free mortgage prisoners. The APPG will raise awareness of these issues within Parliament and aim to ensure that all mortgage prisoners are offered a fair deal.
Seema Malhotra and Charlie Elphicke are members of the APPG on Mortgage Prisoners