An all party parliamentary group has launched today (May 14) to rally support for mortgage prisoners trapped by changes to lending rules and the "scandal" of government loan selling.
The APPG, which consists of MPs from all political parties, will give support in an effort to create tangible change for people who are "trapped by their mortgage".
These consumers are predominantly borrowers who took out a mortgage before the financial crisis but are now blocked from switching to better rates due to changes in lending practices.
Such consumers are often told by lenders they cannot afford the new deal under the lending rules despite the new policy having cheaper monthly payments than their existing one and the borrower having continually paid off their monthly bill and stayed out of arrears.
In cases such as Northern Rock old loans taken on by the government as part of a rescue package after the financial crisis have since been sold on to inactive lenders or private equity funds.
Only last month, the government sold NRAM mortgages to inactive lender Citi, but the Treasury stated it had been unable to find an active lender for the deal.
The issue prompted MP for Dover Charlie Elphicke to present a motion in the House of Commons to force lenders to treat such borrowers as "grandfathered" as a first step towards freeing the 200,000 mortgage prisoners.
Speaking to FTAdviser about the launch of the APPG, MP for Feltham and Heston Seema Malhotra, said: "What’s really important is that there’s now a space and place in parliament for all those who are seeking redress and support for their constituents affected by this crisis.
"There have been multiple aspects of parliament, such as the Treasury select committee or MP Charlie Elphicke's 10-minute rule, that have raised the issue but now there’s a home where all those strands come together."
Ms Malhotra, who is co-chair of the group, said the first item on the group’s agenda was to run a short inquiry to ascertain how the group should respond to the Financial Conduct Authority’s consultation, launched earlier this year (March 26), which set out plans to reduce barriers faced by mortgage prisoners.
Through the inquiry, the group will hear from financial experts and some mortgage prisoners to find out how best to respond.
Ms Malhotra added: "We will also continue to question the government and the FCA through parliamentary questions and letters to challenge the system through all routes we can.
"There’s just something really jarring about the idea that government should be on your side and should have been protecting these customers but instead, government policy has contributed hugely to put them in this position.
"I can’t think of a parallel, where an action of the government has affected families in this way."
Ms Malhotra said she thought there would be a bigger, public inquiry to understand how the government could have sold some of these loans to unregulated lenders and what she called "vulture funds" - a term often used to describe the private equity model.
She said: "I think it’s a scandal. We need to get to the bottom of how the government could have sold these loans as by selling them the government has reduced the consumer protection and safeguards for the loan."
In March, the FCA admitted not all mortgage prisoners would be helped by the new lending rules it proposed as it was up to lenders to offer remortgage opportunities to customers, which made it a "commercial" decision.
Ms Malhotra said this was a key concern for the group alongside the fact that unregulated lenders might not have to highlight this relaxation of the rules to their customers until the end of 2021.
The plight of mortgage prisoners has been pushed into the public eye and brought to the FCA and government’s attention partly through the work of pressure group UK Mortgage Prisoners.
Last month, the pressure group met with the Treasury select committee and the FCA to lobby for faster and better action for mortgage prisoners.
Ms Malhotra said the actions of the pressure group showed the strength of the feelings involved in the problem felt by mortgage prisoners.
She said: "The support they now give each other is incredible and it’s striking to see how many people have been impacted by mental health and breakdowns because of this. Before the group, they thought they were on their own.
"The good thing is that there is now a dialogue with the FCA and the government. As the APPG, we will keep challenging every part of the system — lenders, the FCA and the government."
An HM Treasury spokesperson said: "We know that being unable to change your mortgage can be a difficult and stressful situation.
"That’s why we’re working closely with the FCA to remove barriers, including changing lending rules that will put any customers that are up to date with their payments in a better position when looking to remortgage.
"When selling mortgage assets we engage fully with active lenders as part of the process and have always required bidders to agree to a full set of customer protections. This is before their bids are considered on price and other factors."
imogen.tew@ft.com
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