MPs urge action for mortgage prisoners

MPs urge action for mortgage prisoners

MPs have urged more must be done to help mortgage prisoners stuck with inactive lenders, as the Treasury select committee warned "time is of the essence" in finding an appropriate solution.

The warnings were issued in response to a letter addressed to Nicky Morgan MP, chairman of the Treasury select committee, from John Glen MP, economic secretary to HM Treasury, highlighting the reasons some borrowers had found themselves trapped on higher rates as a result of legislative changes following the financial crisis.

In the correspondence Mr Glen also committed to exploring further solutions for mortgage prisoners and acknowledged "these borrowers find themselves in difficult circumstances".

The letter follows a recent evidence session between Mr Glen and the committee and growing discussions on the subject between government, regulators and trade bodies in recent months.

In response to Mr Glen's letter Ms Morgan urged further consideration be given to those mortgage prisoners currently with inactive firms, acknowledging regulatory focus had so far been given to those with authorised lenders.

She said: "Time is clearly of the essence. People are trapped repaying their mortgages on a far higher interest rate than is necessary through, as the economic secretary said, no fault of their own.

"While the FCA has said it can help a few thousand mortgage prisoners – those with authorised lenders – this does nothing to help the 140,000 customers with inactive lenders."

In a letter to the Treasury select committee in July, the FCA's chief executive Andrew Bailey said the regulator had opened dialogue with active lenders and their trade bodies to secure a solution to the problem, which could involve an internal switch agreement.

The FCA acknowledged finding a solution to help customers who hold mortgages with firms that are no longer active would be more challenging but said the regulator was keen to help both groups.

Rushanara Ali MP, member of the Treasury select committee, echoed Ms Morgan's concerns for customers with inactive lenders.

She said: "The government and the FCA have found an answer for customers of active firms. They must now be bold and innovative in finding a swift solution for mortgage customers of inactive firms.

"The committee will continue its work on this and keep a watchful eye on the Government and regulator’s actions."

At the end of July, a cross-industry voluntary initiative between trade bodies UK Finance, the Building Societies Association and the Intermediary Mortgage Lenders Association saw 59 authorised lenders agree common standards to help those borrowers trapped on pre-crisis mortgages.

The agreement is initially focused on the 10,000 borrowers identified to be with active lenders, with a view to further consideration on what might be possible for the 20,000 customers identified with inactive lenders and the 120,000 with unregulated mortgage owners who are not UK Finance, BSA or Imla members.