The government has refused to support mortgage prisoners in arrears and ignored calls to ensure loan books are sold to active lenders.
Mortgage Solutions reported last week that UK Mortgage Prisoners, the 800-strong group, fears that selling the mortgages to companies that are not active market lenders “will create more mortgage prisoners, locking them into unfair rates.”
However, in a letter to Treasury Select Committee chairwoman Nicky Morgan which was published today, economic secretary to the Treasury John Glen ignored calls to only sell the books to active lenders.
“It is not feasible to require purchasers to offer new products to customers,” he said.
Glen also failed to acknowledge UK Mortgage Prisoners’ claim that many customers found themselves in arrears because they are trapped on high rates as a result of the government’s actions.
He added: “The government does not believe it would be fair or appropriate to provide support to one subset of customers in arrears when it would not do this for all customers who find themselves behind on their mortgage payments.”
FCA lacks data
An industry-wide voluntary agreement was established last year after the Financial Conduct Authority (FCA) published its interim mortgage market study, to allow the 10,000 mortgage prisoners of active lenders to switch to better deals.
But about 120,000 mortgage prisoners remain on a higher interest rate with unauthorised firms, while 20,000 are stuck with inactive lenders. When Mortgage Solutions asked brokers for their thoughts on the situation, most brokers said the government should only sell mortgage books to active lenders.
In another letter sent to Morgan last month, and also published today, FCA chief executive Andrew Bailey said it would be up to the purchasing lender whether they chose to use the new affordability rules for anyone seeking to remortgage.
Bailey said some mortgage prisoners’ circumstances could “put them outside” the risk appetite of lenders, if they have arrears or other significant debts, very high loan-to-value mortgages or mortgages in negative equity.
He said the regulator does not have the data to determine the status of more than 120,000 mortgage prisoners with unauthorised lenders.
Bailey added: “It is not currently possible to say who will or will not benefit from our rule changes.
“We are engaging closely with lenders and lender trade bodies to understand the extent to which firms may be interested in taking on certain customers and how these options will be communicated to affected customers.”