It will also not intervene to force lenders to lend “outside their risk appetite”.
In response to a written question, Andrew Griffith, financial secretary to the Treasury, said that the Financial Conduct Authority’s (FCA) review into mortgage prisoners found there were 47,000 mortgage prisoners who could benefits from switching to new deals but were considered “too high risk… despite being up to date with mortgage payments”.
He continued: “The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no silver bullet to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers.”
Griffith added that the government had already worked with the FCA to change mortgage lending rules, removing regulatory barriers for some mortgage prisoners to allow them to switch.
“These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.”
He said that, ultimately, the pricing and availability of mortgages was a “commercial decision for lenders” and the government could not intervene in that.
“The government cannot force lenders to lend to borrowers that sit outside of their risk appetite,” Griffith said.
He continued that any further work on the issues should consider the “impact and practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers”.
“There is no evidence, for instance, that consumers have experienced detriment that would be resolved by an extension of the regulatory perimeter. It is also worth noting that the standard variable rates (SVRs) charged by inactive firms are in line with those paid by borrowers in the active market.
“The government remains open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market,” he noted.
No Help to Buy extensions planned
Also in response to a written question, Lee Rowley, parliamentary under secretary of state for Department of Levelling Up, said that Help to Buy had helped over 361,000 households and would continue to do so until its completion deadline in March.
He reiterated that the deadline for applications was this coming Monday and no extensions to these dates were planned.
Rowley said: “The scheme is just one of the ways the government has made homeownership more achievable and affordable. Shared ownership, First Homes and the Mortgage Guarantee Scheme continue to support many more people into homes of their own.”
‘Currently no plans’ to amend SMI calculations
Another response to a written question included, Alex Bughart, parliamentary under Secretary of State for Work and Pensions, stating that there were “currently no plans” to amend to calculations of Support of Mortgage Interest (SMI).
SMI is a loan from the Department of Work and Pensions to help borrowers pay the interest on their mortgage. People can be eligible for SMI if they own their home or are in shared ownership, and are on certain benefits like Universal Credit.
He explained: “SMI is calculated by applying a standard rate of interest to the outstanding capital balance. The rate is set at a level equal to the Bank of England’s published monthly average mortgage interest rate.
“A change to the standard interest rate will occur when the Bank of England’s average mortgage rate differs by 0.5 percentage points or more from the rate in payment.”
