Critics Slam Government’s Apathetic Attitude to Mortgage Prisoner Crisis
Mortgage prisoners have been propelled back into the spotlight this week, as MPs prepare to vote on an amendment to the Financial Services Act that would result in an interest rate cap for borrowers locked into uncompetitive mortgages.
Chancellor Rishi Sunak has repeatedly promised to find a “workable solution” for the 250,000+ homeowners locked into excessively costly mortgages, but the Treasury has labelled the SVR cap “unfair” and Conservative MPs are being instructed to vote against it.
The vast majority of mortgage borrowers in the UK have the option of switching to a more competitive deal at a lower rate of interest, either with their current lender or by transferring their mortgage elsewhere. If for any reason your current deal becomes uncompetitive or unsatisfactory, there is usually the option of switching.
It is, however, estimated that more than 250,000 mortgage payers are currently locked into loans with excessively high rates of interest, from which they cannot escape. The collapse of lenders like Northern Rock resulted in tens of thousands of mortgages being sold by the treasury to unregulated firms, who do not provide the option of switching to more competitive deals.
Forced to pay significantly higher rates of interest than national averages, mortgage prisoners with an average loan value of £165,000 are estimated to have overpaid £25,000 to £45,000 in excess interest in the course of the past 10 years.
Numerous promises have been made to seek urgent resolutions, but the Treasury continues to frantically lobby MPs not to support an amendment that would result on a cap being placed on interest rates for those affected.
Critics Call for a Level Playing Field
Despite repeated assurances from the chancellor and other high-level government figures, little to no affirmative action has been taken to find a workable solution to the issue.
“We need to do something to protect these consumers, we need to do something to bring back some sort of level playing field for people who are in this situation through no fault of their own they took out their mortgages in good faith with fully regulated High Street lenders,” commented Seema Malhotra, chair of the all-party parliamentary group on mortgage prisoners.
“It’s through the government selling off these mortgages without adequate protection to these mortgage loan sharks that has led to this situation. A targeted intervention for this specific circumstance is what’s needed and it’s needed now.”
Meanwhile, the BBC reached out directly to the Treasury for a statement on the issue, and received the following reply:
“We know that being unable to switch your mortgage can be incredibly difficult. But an interest rate cap would have serious market implications and be unfair to other borrowers,” the treasury spokesperson said.
“Many borrowers could now find it easier to switch to an active lender or continue interest-only payments, thanks to recent rule changes by the Financial Conduct Authority,”
“We’re committed to finding practical and proportionate options to address this issue and will set out further steps shortly.”