A highly critical report published by London School of Economics (LSE) yesterday laid responsibility for the mortgage prisoners situation squarely at government for prioritising profit rather than customer outcomes when selling off the loan books over the last decade.
Economic secretary to the Treasury John Glen has already promised to review the report’s proposals, but despite meeting with mortgage prisoners earlier in the year to listen to their concerns, Treasury has rejected calls to help and left it to the regulator and lenders to try to support the prisoners.
A Treasury spokesman told Mortgage Solutions: “We know that being unable to switch your mortgage can be incredibly difficult.
“Thousands of borrowers will now find it easier to switch to an active lender or continue interest only payments thanks to recent rule changes by the Financial Conduct Authority (FCA) – and we have been working closely with the industry to ensure more is done to help those who are eligible to switch.
“We remain committed to looking for practical new solutions for borrowers who are struggling.”
The LSE report acknowledged the FCA had realistically gone as far as it could without being given greater powers by Treasury to regulate the inactive and closed book lenders.
It noted that only a small minority of the roughly 250,000 trapped borrowers were likely to be helped by the rule changes introduced by the FCA and implemented by lenders.
In it’s response an FCA spokeswoman said the regulator welcomed the report’s engagement on the complex issue.
“We continue to work with government, firms, consumer groups and other stakeholders to help achieve better outcomes for mortgage prisoners,” she said.
“This is alongside the substantial work we have been doing since March to provide support for all mortgage borrowers affected by the coronavirus crisis.”
The Buildings Societies Association (BSA) gave the report its full support.
“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,” it said.
“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.”