What might happen to them? Where might they end up? And would the lender concerned be in danger of potentially creating a number of mortgage prisoners if they did not sell their mortgage book to an active lender?
Tesco Bank has hit the headlines having said it cannot guarantee its mortgage book will not be sold to an inactive lender or any other organisation which does not currently lend in the UK market.
That creates a level of nervousness, especially at a time when the market is seeking solutions to the mortgage prisoner problem, and does not want thousands more potentially joining that group.
The problem is a weighty one though and, even with the announcements by active lenders about the support they can provide to mortgage prisoners on their books, there are still great swathes of borrowers who are not so fortunate, who are stuck on the books of those not active, and are still waiting for a suitable solution to be found.
Would a code of conduct work?
But, what might this achieve? Lenders already have to comply with responsible lending rules and of course, treating customer fairly, is a priority for all.
Would a code actually solve the problem? Perhaps only if it insisted on lenders having to sell mortgage books to active lenders.
I’m uncertain whether this could be made to stick unless it came with sufficient political and regulatory weight.
And what about those who are already prisoners? A future code does not confront the problem of those who are already in such a situation.
Supporting pipeline business
The other issue which is connected with this is around a leaving lender’s pipeline, and what happens to it when a lender makes the decision to stop lending.
We have some recent experience, although our decision was only temporary, and we are now obviously back lending again.
However, I think it is important that commitments made prior to any such decision are honoured. For instance, our contracts with our funders mean we can honour not just those cases where an offer has been made, but those which are pre-offer.
I suspect few other lenders are in such a position but, to our mind, we felt this was necessary as we’re fully aware of the problems this presents for advisers and their clients.
It’s fair to say, taking this approach was welcomed by many who continue to deal with this.
My own feeling is that, when it comes to pipeline business, we should all be going this far but that a decision on whom a book is sold to has to ultimately be a decision for that lender.
Clearly, it would make sense for all to seek out active lender purchasers but I suspect unless this comes from a regulator and is written into the rules lenders have to follow, then it is unlikely to happen.