The call came ahead of a House of Lords debate on amendments to the Financial Services Bill, which would enable such a cap.
However, the debate on 8 March ran late and did not reach the relevant amendment 99, tabled by Lord Stevenson. It’s expected to be rescheduled.
MPAG rebuffed concerns raised in previous debates that an SVR cap would result in structural changes to the mortgage market.
Its report, ‘UK Mortgage Prisoners: Setting the Record Straight’, published to coincide with the Lords session, stated: “This is a targeted cap that will help all borrowers in particular and specific closed books which are a legacy of the global financial crisis.”
MPAG also asked for a government-backed mortgage to help prisoners transition to the mainstream market.
The group’s research showed that mortgage prisoners pay on average a 1.33 per cent higher interest rate than the market SVR. The highest recorded rate was 13.5 per cent.
It stated that affordability criteria introduced by the Financial Conduct Authority helped only 40 out of 250,000 prisoners – and not 125,000 as Treasury has said.
Martin Lewis, consumer finance expert, said: “The independent London School of Economics report, which I funded, has a cogent argument as to why an SVR cap isn’t a balanced long-term solution. Yet, in lieu of anything else, I believe for those on closed-book mortgages, it is a good stopgap while other detailed solutions are worked up.”
Regulatory blindness
The Lords debate did cover amendment 127, tabled by Lord Leigh, which would prohibit the sale of mortgage loan books from authorised to non-authorised entities.
Leigh said: “The phrase ‘mortgage prisoners’ is exactly right, as thousands of people find themselves in such a situation through no fault of their own.
“It seems an extraordinary loophole that a whole book can go from an authorised to a non-authorised entity with, apparently, not a single regulatory eyebrow being raised,” he added.
