Government to consider ‘Martin Lewis’ mortgage prisoner proposals ‘carefully’
In response to a written question about LSE’s mortgage prisoner report, which came out last week and was funded by Money Saving Expert Martin Lewis, Economic Secretary to the Treasury Andrew Griffith said: “The Government understands that being unable to switch your mortgage can be extremely stressful.
“The Government has consistently committed to looking for practical and proportionate options where they will deliver genuine benefits for affected mortgage borrowers, and where interventions are fair to borrowers in the active market, and to taxpayers. We will consider the proposals put forward in this very recently published report carefully.”
The report offers four proposed solutions, which it said could cost between £50m to £347m over the next decade depending on take-up and whether the government holds on to some equity loans.
The solutions include free financial advice, interest-free equity loans to pay off Northern Rock’s Together loans, government-backed equity loans and a government guarantee to offer new mortgages to mortgage prisoners.
Griffith has previously said the government is open to solutions as long as they do not “pose unacceptable financial stability risks” and are not “unfair to other borrowers”.
He said the government had already worked with the FCA to change mortgage lending rules, which removed some of the regulatory barriers to some mortgage prisoners to allow them to switch.
However, he said that ultimately, pricing and availability of mortgages was a “commercial decision for lenders” and the government would not intervene in such decisions.
Griffith also noted that standard variable rates (SVR) charged by inactive lenders were “in line with those paid by borrowers in the active market”, therefore ruling out an SVR cap for mortgage prisoners that was called for by campaign group UK Mortgage Prisoners.
At the time, UK Mortgage Prisoners said that an SVR cap of two per cent above the Bank of England’s rate would be vital and also called for all inactive lender to offer mortgage prisoners fixed rates.
Lenders should be held ‘financially responsible and liable’
Harcus Parker’s senior associate Matthew Patching said the firm welcomed the LSE report and its “excellent proposals to help mortgage prisoners escape this appalling financial trap”.
Harcus Parker is the law firm bringing a £800m legal case against TSB on behalf of mortgage prisoners.
He continued: “However, it is our belief that as part of the remedy lenders who have taken advantage of the mortgage prisoners by charging excessive interest rates should be held financially responsible and liable.”
Patching said this was for lenders managing the books currently, as entities like Northern Rock do not exist in the same capacity.
“It is clear to us that it is only right that the organisations that have profited from this practice by exploiting financially vulnerable and trapped customers should help to recompense them. This would also help to act as a deterrent for this practice to be repeated in the future and mean less of the financial burden of correcting the situation falls on the taxpayer,” he noted.
Patching added: “We believe that our group legal action will help to get justice for those mortgage prisoners who have suffered far too long at the hands of exploitative financial institutions.”