In an open letter, Seema Malhotra MP, co-chair of the APPG on mortgage prisoners and Kevin Hollinrake MP, co-chair of the APPG on fair business banking suggested introducing a two per cent cap above the base rate on all mortgage standard variable rates (SVR) to help mortgage prisoners.
The MPs said it was “imperative” that homeowners were helped not only by deferring payments but also with “real savings” as the relaxation of affordability rules had yet to benefit any of the 250,000 mortgage prisoners.
In the letter, the MPs asked the regulators to define what was meant by an “outlier rate,” in response to the FCA’s warning in May that it would take action on lenders who put mortgage prisoners on unfair rates.
MPs also questioned if it was against regulatory requirements for a lender to refuse to tell customers why variable rates had increased.
Malhotra said: “Too many mortgage prisoners have been exploited by being held on high standard variable rates or have seen their rate increased with no justification.
“The CMA and the FCA should intervene quickly to cap the interest rates being charged. The coronavirus has led to unprecedented strain on family finances and we need to help mortgage prisoners, including many key workers, get a better deal.”
Hollinrake added: “It is simply unfair that hundreds of thousands of UK individuals, couples and families are locked out of a mortgage market that the rest of us take for granted.
“Even if lenders were following the new guidance on the affordability test, the FCA admits that this will only help a small fraction of mortgage prisoners. A cap on the SVR is the simplest and quickest way of addressing this injustice.”