‘Mortgage Prisoners’ in UK: A Plea for Government Intervention

During a recent Prime Minister’s Questions, the plight of Britain’s ‘mortgage prisoners’ was thrown into the spotlight. The issue was brought to the fore by SNP MP Martin Docherty-Hughes, who appealed to Prime Minister Rishi Sunak to take prompt action to aid nearly 200,000 borrowers affected by this predicament.

Trapped in a Mortgage Morass

These borrowers, victims of the 2008 financial crisis, have found themselves unable to switch to more favorable mortgage rates. This unfortunate situation is due to the stringent borrowing criteria established in the aftermath of the financial meltdown. In many cases, these loans were sold to inactive lenders, often investment companies that are not regulated to provide new mortgages. This has left borrowers saddled with high standard variable rates and in a precarious position of potential home repossession.

Government Response and Ongoing Efforts

Addressing the issue, Prime Minister Sunak acknowledged the complexities of the situation. He discussed ongoing efforts to devise solutions, referencing his previous work on the issue during his tenure as chancellor. The Prime Minister also shed light on current discussions involving the Treasury and Chancellor Jeremy Hunt. The government’s recognition of the problem and commitment to finding a resolution offers a glimmer of hope to the beleaguered borrowers.

The ‘Mortgage Prisoner’ Statistics

According to a report by the Financial Conduct Authority in 2021, approximately 47,000 of the 195,000 mortgage holders in closed books are classified as mortgage prisoners. These individuals are up-to-date with their payments but are unable to switch to a different mortgage plan. The remainder have either not attempted to switch, would not benefit from switching, or have fallen into arrears with their payments.

The implications of the ‘mortgage prisoners’ issue extend beyond the financial realm. It also involves homeowners’ access to Support for Mortgage Interest (SMI) hampered by long wait times and stringent eligibility criteria. There have been calls for urgent changes to the SMI, including reducing the waiting period from 39 weeks to 13 weeks, abolishing the zero earnings rule, and making the scheme more flexible. The COVID-19 pandemic has further exacerbated the problem, increasing the risk of home repossession for struggling mortgage holders.