New report outlines policy solutions to free mortgage prisoners

Jessica Nangle

November 12, 2020

mortgage prisoners

A report commissioned by MoneySavingExpert.com has put forward eight policy solutions to free mortgage prisoners.

The report, entitled ‘Releasing the mortgage prisoners’, was published by the London School of Economics (LSE) and funded by a personal donation from Martin Lewis, who chairs the Money and Mental Health Policy Institute.

The report found that mortgage prisoners have higher rates of physical and mental problems than the average borrower and are up to 40% more likely to default as a result of coronavirus according to MoneySavingExpert.

When the research was unveiled earlier this year, the Economic Secretary to the Treasury John Glen reportedly wrote to Lewis saying he would give “full consideration” to the proposals.

Martin Lewis said on the MoneySavingExpert website: “Mortgage prisoners are the forgotten victims of the 2008 financial crash.

“The government at the time chose to bail out the banks, but unfairly – immorally – hundreds of thousands of their victims were left without adequate help, trapped in their mortgages and the financial misery caused by it. And they have been forgotten ever since.

“The Prime Minister has touted the idea of subsidising 5% deposit mortgages for first-time buyers.

“Alongside that, there is a moral responsibility to release money to free mortgage prisoners from their penury.

“I was delighted when Treasury Minister John Glen agreed in advance to review any policy proposals the LSE came up with.

“The independent, practical solutions in this report leave no excuse for not tackling this, though as an urgent first step, the government must agree to do the remedial work, using critical data it has access to, to cost the solutions up fully.

“Speed is necessary now, as coronavirus has torn through people’s livelihoods.

“But for people whose finances and freedom have already been destroyed for more than a decade, they had already met breaking point – they are now defeated.

“Nobody should underestimate the detriment to people’s lives and wellbeing if the Treasury doesn’t act, and act soon. Intervention can and will save lives.”

The report highlights that the FCA has gone as far as it can within its current powers to help mortgage prisoners, and that its solutions can only help a small minority of those affected.

It concludes that only the government can free mortgage prisoners, and have a “moral responsibility” to do so.

Some of the proposed measures the LSE and MoneySavingExpert put forward include interest-free government equity loans and a ‘mortgage rescue’ which would involve a property being sold to housing associations with a buy-back option later.

This report has been published following a BBC News report which told the story of Diane, a mother of two, who has been trapped on a mortgage that charges more than double the market interest rate and the stress it has caused.

Rachel Neale, from the UK Mortgage Prisoners group, reacted to the report and told MoneySavingExpert: “UK Mortgage Prisoners would like to thank Martin Lewis for funding the research and researchers at LSE for their attempts to find solutions.

“It is now abundantly clear that borrowers were ‘not to blame’ for taking out mortgage products with ‘household names’ such as Northern Rock and Bradford and Bingley.

“The responsibility lies largely with ‘successive governments’.

“The financial and emotional harm sustained for over a decade has been devastating for mortgage prisoners.

“These consequences are well known by the government; therefore it is now time to find a fair and ethical solution for all mortgage prisoners.”

A BSA spokesperson also welcomed the report: “This report takes the bull by the horns and explores government actions that may help some of the many mortgage prisoners for whom the FCA modified affordability rules won’t work.

“The LSE report has echoed our consistent call for the FCA perimeter to be extended to closed mortgage books and we welcome recognition that government has an important role to play.”

Sign up to our daily email