Consumer group calls for urgent action on mortgage prisoners

The Financial Conduct Authority’s plans to help mortgage prisoners are welcome but hugely insufficient and action is needed now from the Government, according to the UK’s biggest consumer website.

MoneySavingExpert, in its reply to the FCA’s consultation on proposed change to responsible lending rules and guidance, says that the authority can only help a small fraction of those trapped and these proposals cannot be the final policy response to this problem.

As part of its response MSE conducted the first large scale survey of mortgage prisoners, who repeatedly portrayed their situation as ‘hell’ and described the financial and mental hardship caused by being unable to switch to a cheaper deal.

Indeed, one respondent said: ‘Being a mortgage prisoner has been hell to me, you worry about losing your home, you can’t plan on starting a family and moving forward with your life. The whole experience affects your mental wellbeing and this has now got to stop.’

Another said: ‘It makes me depressed. I feel I have let my family down immensely. I have been on and off medication for 10 years. Being a mortgage prisoner has taken away so much of my inner being. I am not the person I was, I am beat.’

‘It is a rock around my neck. I am being strangled by my own government. The FCA and FOS are nothing but a front. The FCA Principle 6 has clearly been breached. It cannot be fair or reasonable to transfer a mortgage to an inactive lender, hike up the SVR and make it impossible for them to find another deal as they would have done under their original mortgage,’ said yet another.

Martin Lewis and MoneySavingExpert have been campaigning for mortgage prisoners for several years and they say that the Government must now accept responsibility for finding a solution for those prisoners who won’t be helped by the FCA’s proposed measures. They add that the Government must also immediately stop selling mortgages to unregulated firms.

The regulated mortgage industry wants to help eligible customers with unregulated or inactive lenders switch to a better deal, according to Jackie Bennett, director of mortgages at UK Finance. ‘We support the FCA’s ambition in its proposals for greater flexibility over affordability assessments and are keen to work closely with the regulator in a joint implementation group to help those firms who want to participate and work towards a common launch date,’ she said.

‘ We have suggested the FCA collect up to date information on closed book customers so lenders can understand their circumstances better and develop products that meet their needs. We will continue to work with the FCA and government to consider what more could be done to help customers in closed books who will not qualify for a new mortgage under the new proposed rules,’ she added.

In May 2018, the FCA found 150,000 consumers in the UK were mortgage prisoners. The regulator said it was able to help 30,000 of the mortgage prisoners it identified whose lenders the FCA could force to help their ‘imprisoned’ consumers if needed. But the other 120,000 ‘prisoners’ have had their mortgages bought by firms who aren’t authorised to lend, and so the FCA has no power to make them do anything.

In October 2018, Treasury Minister John Glen admitted that mortgage prisoners ‘need to be dealt with’ at an event run by MoneySavingExpert at the Conservative Party Conference.