Money Saving Expert (MSE) plans to instruct the London School of Economics and Political Science (LSE) to carry out new research which will look for solutions to ‘unchain’ mortgage prisoners.
The research is being funded by MSE’s founder and chair Martin Lewis via his charitable fund.
The aim is to find evidence-based policy solutions for the 170,000 people trapped in their mortgages, which hopes to push the government to step in and rescue mortgage prisoners that the financial regulator can’t reach.
Martin Lewis, founder of Money Saving Expert, said: “It’s time the government accepted the responsibility to find a solution for these vulnerable consumers.
“Its failure to do so is short-sighted. The cost of mortgage prisoners doesn’t just fall on the individuals, it falls across society.
“The impact of leaving people locked in to unaffordable mortgages can be catastrophic.
“It can leave them dependent on the state, with little savings for old age, and even adding to NHS costs with the hideous and disastrous mental health impact that can occur when you destroy someone’s financial life choices.
“So over the next few months, we’re asking the LSE to explore a range of cost-effective, practical policy solutions the government could employ to rescue mortgage prisoners – which we can then take to the Treasury.
“I won’t pre-empt their work, but it’ll include a feasibility study of solutions – for example, subsidising competitive lenders to enable them to offer mortgage prisoners a decent deal.
“Then I hope where possible that can be compared to the cost to the economy of doing nothing – and leaving mortgage prisoners locked in for life or losing their homes.
“It’s worth remembering that the government spent billions bailing out one set of victims of the financial crash – the banks.
“Yet it’s done nothing to help another set – those locked into high-rate mortgages.
“In fact it’s actually responsible for some of their pain, selling the mortgage customers of former lenders like Northern Rock and Bradford & Bingley to unregulated, inactive lenders who have no other mortgage products, leaving these mortgage prisoners with no option other than to try to afford to keep paying obscene rates.”
The FCA have responded and have said they continue to actively work with industry groups to support lenders in “preparing and delivering the changes they need to make in response to the rules”.
The authority have said that this includes setting up the industry implementation group, which works with interested lenders and administrators to improve customer journeys and bring products to market as soon as possible.
An FCA spokesperson said: “We are determined to help mortgage prisoners who are eligible under our rule change, meet the criteria for lending and would benefit from doing so.
“We have done everything within our power, and it is now for the industry to take action.”