'Freedom in sight' for mortgage prisoners as MPs debate SVR cap

Rozi Jones
13th January 2021
mortgage house prisoner
"Capping SVR would end eye-watering monthly costs at a time when the global pandemic has led to unprecedented strain on household finances"

The APPG on Mortgage Prisoners have announced that 'freedom could be in sight' for the UK’s 250,000 mortgage prisoners as MPs debate three amendments to the Financial Services Bill in Parliament this week.

Under the amendments, mortgage prisoners held in inactive closed books such as Heliodor, Landmark, and NRAM, would benefit from a cap to Standard Variable Rates on closed book cases.

The government intervened in the energy market to introduce a cap which helped people across the UK, and senior cross party back bench MPs are now advocating for a moderate cap to operate only in closed book cases where mortgage prisoners have no option to change provider or product.

Alongside this first step, the amendments would also bring vulture funds under FCA supervision and would also require mortgage customers to give their informed consent before their mortgage is transferred to an inactive or unregulated new lender, in a move similar to the No Consent, No Sale legislation being brought forward in Ireland.

The largest group of mortgage prisoners are former customers of Northern Rock who were sold on by the government to vulture funds like Cerberus. Over the past 12 years, many mortgage prisoners have paid from £20,000 to over £150,000 more than customers of active high-street lenders.

Despite new criteria introduced by the FCA at the end of 2019 to help mortgage prisoners, the FCA’s own prediction was that only 14,000 of the 250,000 mortgage prisoners may benefit using the reformed affordability test brought in towards the end of 2019.

NHS worker Kelly Gynn said: “I'm a mortgage prisoner and also a key worker for the NHS, I've got a mortgage which is with a closed bank only offering an SVR. This is worrying, as a lone parent money is tight. Having a capped mortgage would reduce so much stress and anxiety that the rates wouldn't increase, this would bring some security to my life and peace of mind. For almost 15 years I've had the same mortgage, sold onto inactive lenders and the rates have been increased without any questions asked from myself. Having a capped mortgage at a lower rate would reduce repayments and security to myself along with the rest of the mortgage prisoners.”

Kevin and Melissa Antwhistle, key workers in a power station and NHS respectively, commented: “My wife and I have been trapped paying £780 per month on our Northern Rock Loan compared to £414 if we could remortgage. Because we borrowed more than the value of our property – something that regulators approved at the time – the regulators affordability rules say we now can’t remortgage. The rules in other words say we can’t afford to pay less. If the interest rates were capped for closed book mortgages it would literally be the end of a living nightmare and the start of a life worth living again to actually be freed from paying these ridiculously high interest rates for the last 12 long years. We simply do not deserve to be punished like this.”

Rachel Neale, lead campaigner at UK Mortgage Prisoners, said: “Without disrupting the wider market, capping SVR would end eye-watering monthly costs at a time when the global pandemic has led to unprecedented strain on household finances, we must act now to free mortgage prisoners from high rates and untenable debt.”

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