The three amendments to the Financial Services Bill brought this week would have given the Financial Conduct Authority (FCA) wider oversight of the mortgage market, capped standard variable rates for trapped borrowers, and given borrowers the chance to block the sale of their mortgage to another lender.
Economic secretary to the Treasury John Glen has drawn the ire of campaigners after speaking against all three measures in the debate this week and offering no alternatives.
He also said it would be “disproportionate to support a small number of borrowers” with the moves.
Figures used by Glen in the House of Commons were disputed by other MPs and have since been further criticised by mortgage prisoner campaigners.
The campaigners also condemned some of Glen’s language noting it was “unconscionable” that a minister was choosing to blame mortgage prisoners for the situation they were trapped in.
Glen has been a source of frustration for mortgage prisoners for several years as despite meeting with representatives he has taken little action to remedy the situation and blocked almost every suggestion.
No analysis of impact
“The most significant error in the minister’s claims is that we are dealing with high-risk loans, an assumption used to dismiss the SVR cap,” a statement from the UK Mortgage Prisoners action group said.
“Mortgage prisoners are widely reported as high-risk, but until now there has been no analysis of the impact that these borrowers’ time as mortgage prisoners had on their financial situation.
They also criticised Treasury for its role in the crisis and lack of action.
“Critically, the Treasury refuses to take responsibility for the debilitating effect its actions have had on mortgage prisoners. This ‘complex problem’ the minister states, has been caused by the Treasury,” the group continued.
“Until they face up to their responsibilities and accept that it is due to their past actions that mortgage prisoners are in this position any substantial solutions will be meaningless.
“We are sick and tired of hearing the minister try and shift blame onto us. It is shameful behaviour.”
Speaking in Parliament, Glen claimed 120,000 of the estimated 250,000 mortgage prisoners had already been helped by the FCA’s move to permit a modified affordability assessment.
However, the FCA itself warned at the time of launch that the measure was only likely to help at most about 14,000 borrowers.
This was echoed by campaigners who said up until this point only a handful of mortgage prisoners have been helped in the UK Mortgage Prisoners group.
“Mortgage brokers contacted by the campaign group say they cannot help either because they never received a letter from their closed book owner or because after nine years being trapped paying eye-watering rates they no longer pass high street lending criteria,” the group said.
“UK Mortgage Prisoners members have anonymously stated that this amendment is the difference between feeding their children, themselves, or continuing to rely on food banks.
“It now begs the question, why won’t John Glen take action to undo the unforgivable actions from HM Treasury in selling these loans in the first place and finally free mortgage prisoners?”
SVR cap would not hit securities market
In Parliament he said he was “committed to finding practical ways to help” but added that he was afraid the new clauses risked a number of unintended consequences.
He also argued it “would be disproportionate to support a small number of borrowers, as it would be likely to have an impact across the whole of the mortgage market and in the worst case could damage financial stability”.
However, this was disputed by MPs from both sides of the House of Commons.
Speaking about the cap on SVRs for mortgage prisoners, fellow Conservative MP Kevin Holinrake said: “The evidence that we have says that it would not affect the marketplace of residential mortgage-backed securities, about which the minister is concerned; that it would be highly effective; that we could define it for a certain cohort; and that it would relieve hundreds of thousands of people from dire financial straits overnight.”
The FCA has also previously added to the calls for it to be given greater oversight of the mortgage market to help the mortgage prisoners.
In his select committee hearing last year FCA chief executive Nikhil Rathi said supporting mortgage prisoners would be ‘a priority’.
And in 2019 the FCA said: “In our view, there is a case for extending the regulatory perimeter to capture all mortgage loans. This would leave us better able to influence market behaviour through a combination of our Principles and rules.”
However, in a statement published in July, the regulator appeared to step back from its demand to extend its regulatory reach and said instead this was a matter for Treasury and Parliament. It repeated this in its regulatory perimeter update in September.
The FCA did not wish to comment on the situation.
Mortgage Solutions has contacted Treasury for comment.