The amendment was passed in the House of Lords nearly two weeks ago and would have allowed the government to set a maximum SVR for borrowers who were tied to inactive or unregulated lenders.
The cap would have been two per cent above the Bank of England’s base rate.
However, despite various MPs saying they were in favour of the amendment in Parliament, the majority voted to disagree with the measure.
The number of Conservative MPs following the whip voting to scrap the amendment totaled 355, while 195 Labour MPs voted in favour in conjunction with 72 MPs from other parties.
‘Sticking a plaster’ on the problem
Anthony Browne, Conservative MP for South Cambridgeshire said during the debate: “We agree that we need to help these people, but the question is: how do we do that? The cap of interest rates is, as people say, a sticking plaster—even its supporters say that. I can see the appeal of it, but this sticking plaster comes at great cost: Parliament would be setting out interest rates in primary legislation.
“That could lead to huge unintended consequences in lots of ways—for example, through the impact on financial stability that we heard about earlier on some of the firms. It would also set an extraordinary precedent, with the government doing price controls in that way.”
He added: “It is also really not the solution we need. Where someone is trapped in a horrible prison with their guards abusing them and they are very uncomfortable, would they want that prison to be made more comfortable and the guards to behave themselves, as this cap in effect proposes, or would they want to get out of the prison?
“They would want to get out of the prison. We need to make sure that mortgage prisoners can move to other mortgage providers.”