A bill designed to address the plight of mortgage prisoners has been introduced to Parliament by MP for West Dunbartonshire, Martin Docherty-Hughes.
The SNP MP explained the bill seeks to enable certain mortgage borrowers to switch to new mortgage arrangements.
Explaining the bill’s aims, Docherty-Hughes said that it “seeks to end evictions for mortgage prisoners” as a way to “lighten the burden they have carried over the years”.
He also identified that it is “natural” to put a cap on SVRs being offered to mortgage prisoners, especially considering the current climate of mortgage instability.
“Our constituents have been dealing with high mortgage rates for over a decade. We gain nothing from pushing our constituents further into debt,” he said.
Docherty-Hughes said the government owed it to mortgage prisoners to “help them find a way out of their current mess” by allowing them to pivot back into the mortgage market.
Governmental responsibility
Docherty-Hughes criticised the two largest parties for inaction on this issue, stating he had previously brought up the plight of mortgage prisoners to the government.
“In January, during a session of prime minister’s questions, the prime minister assured me that the UK government was aware of the difficult situation facing mortgage prisoners and would be taking action,” he said.
“However, last week, the chancellor failed to introduce measures to tackle the issue.”
He went on to describe the omission of mortgage prisoners in the Spring Budget as “scandalous” and accused the UK government of “sitting on its hands after making billions from the sale of closed mortgage books”.
This criticism was not exclusive to the current government however as the MP also said that the bill aims to end “unfair financial injustice” and address the failures of “successive Conservative and Labour governments”.
He also stated the bill is “essential” to hold the government to account and to “hold a light” to the fiscal approach of the opposition.
In response, a spokesperson for HM Treasury said: “The government understands the difficulties faced by borrowers who were not able to switch to a new mortgage deal.
“We have updated mortgage lending rules, removing the barrier that prevented some mortgage prisoners from being able to switch, and introduced significant financial and legal protections for those most in difficulty.
“We continue to work with the Financial Conduct Authority and the sector on this issue and will carefully consider practical and proportionate solutions put forward.”
Explanation
In the bill’s introduction, Docherty-Hughes explained the plight of mortgage prisoners, pointing out that, for well over a decade, the UK government were the ultimate holders of the mortgages through UK asset resolution.
This was before the UKAR sold a tranche of books in 2019 to a company called Heliodor, which exists as a vehicle to “service the existing Northern Rock mortgages”.
A spokesperson for Heliodor said: “Topaz is not a lender. It is a regulated loan administrator – it did not buy any tranches of loan books from UKAR. Instead, the books were sold to investors who then appointed Topaz to provide the ongoing administration of the loans.
"The sale did not impact customers’ terms and conditions, with Topaz continuing to service every loan in line with the terms and conditions that borrowers signed-up to.
"As an administrator, Topaz works hard to support customers who are experiencing financial difficulties, particularly in the present economic climate, and frequently liaises with mortgage holders to help them better understand their options and switch to other products.”
The MP offered a more personal example of how being a mortgage prisoner can affect people’s lives, recounting that a constituent of his was approaching the end of a 25-year term on their mortgage.
He stated this constituent was forced into the interest-only plan just a few years after they began to make repayments.
Consequently, they now risk losing their family home of a quarter of a century unless they can come up with the full amount owed to Heliodor.
Docherty-Hughes said: “People have ended up paying what is essentially rent to a vulture fund which almost certainly knows it will be able to acquire the property at the end of the term.
“Topaz will have been licking its lips I’m sure at a deal that is basically guaranteed to be paid twice, first through monthly payments and secondly when Topaz Finance sells their home from under them in 2029 at a healthy profit.”
Docherty-Hughes added: “There is nothing we can do to make up for what UK mortgage prisoners calls the ‘extortionate interest rates, severe financial restrictions and mobility and mental and physical issues caused by this government-made scandal’.
“However, that does not mean we should not try.”
The second reading of the bill is expected on June 14th.
tom.dunstan@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
