HM TreasuryJun 7 2019

Govt urged to act on mortgage prisoners

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Govt urged to act on mortgage prisoners

MPs have urged HM Treasury, the Bank of England and the Financial Conduct Authority to do more to help mortgage prisoners.

In a debate in the House of Commons yesterday (June 6), MP for Dover Charlie Elphicke put forward a motion that proposed a variety of changes to the way the three authorities act to help those trapped by their mortgage when they could get a cheaper deal elsewhere.

The proposals included that the Treasury immediately requires UK Asset Resolution — the government’s holding company of bailed out loans — to cease selling mortgages to any unregulated entity, that the BoE should take all possible measures to ensure consumers are given access to new deals and that the government expands the scope of FCA regulation to include the sale of the mortgages.

Mr Elphicke also put forward that lenders should be obliged by the FCA to take on mortgage prisoners and treat them as grandfathered, without any regulatory penalty for the bank they move to, and a wholesale ban on selling mortgages to unregulated firms.

He said: "It is time for a new covenant to deliver fairness for borrowers — a deal that will set mortgage prisoners free.

"The rules say that they cannot afford payments on a mortgage of, say, 2 per cent so they are forced to continue with a mortgage of 5 per cent or more. It makes no sense at all.

"Every one of those 200,000 families has a story to tell about how they struggle to get by, forced to keep up payments to keep a roof over their heads, often going without."

Mr Elphicke went on to say that mortgage prisoners lived in fear of interest rates rising, noting that the country had experienced a period of low interest rates that could change in the next couple of years.

The Treasury’s sale of mortgage loan books to unregulated and inactive lenders has sparked controversy, most recently when old Northern Rock loans were sold to inactive Citi in April. But the Treasury stated it was unable to find an active lender for the loans.

Mr Elphicke said: "It is wrong for the Treasury to pursue the highest amount of cash at the expense of vulnerable borrowers who have been placed in a worse position than otherwise would have been the case.

"We need to consider a wholesale ban on selling these mortgages to unregulated firms — full stop. The best way to achieve that is through the regulation of the whole industry."

Mr Elphicke added there should be an urgent inquiry into the sale of mortgage debt by any financial institution to any unregulated entity, a topic already being looked at by the APPG for mortgage prisoners inquiry launched last week.

This week Ukar announced it had repaid the government's rescue package loan and had whittled its number of customers, through such sales, down to 35,000.

Joining the debate, MP for Blackpool South, Gordon Marsden, said actions taken by the government and the FCA so far were "inadequate" and there "had not been proper due diligence throughout this process".

He said: "The FCA’s behaviour is as much use as a chocolate fireguard, and it is time that this government and this minister came clean about what they are going to do in practical terms."

Camborne and Redruth's MP, George Eustice, suggested UK Finance’s voluntary agreement — which asks lenders to offer better deals to mortgage prisoners — should be a statutory one.

He also put forward that the government should issue new guidance to the courts when assessing any application for a possession order from a lender, and that there should be a presumption against granting any repossession order where a customer has been refused the ability to switch to a more affordable product.

Economic secretary John Glen, speaking on behalf of the government, said the FCA’s proposed modified affordability assessment — which means mortgage prisoners will not have to pass the standard stringent tests as long as they are not borrowing more money — would allow many more mortgage prisoners to switch.

He added: "The consultation for these changes will run until the end of this month and I then expect the FCA to implement these changes rapidly, later this year.

"In the meantime, those borrowers whose mortgages are sold to a purchaser that does not offer new mortgage deals will continue to be protected by the FCA principles of 'treating customers fairly'."

He also said that while the FCA's shake up in affordability rules was optional for lenders, he stressed the regulator was "working with industry representatives" to ensure a good outcome as there was "no point having a solution that does not solve the problem".

He added: "I recognise the urgency associated with securing this solution, and I am urgently working to ensure that the FCA delivers on both what it wants to deliver and what we have asked it to deliver."

imogen.tew@ft.com

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