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Lords withdraw SVR cap amendment from FSM bill

  • 15/06/2023
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Lords withdraw SVR cap amendment from FSM bill
The amendment to the Financial Services and Markets Bill to introduce a cap on the standard variable rate (SVR) charged to mortgage prisoners has been withdrawn following a debate.

Lord Sharkey re-tabled the amendment last week which proposed capping the SVR at two per cent above the base rate for mortgage prisoners to allow them to switch onto new fixed deals. 

However, at a parliamentary debate on Tuesday, it was said that such a policy would create a divide between borrowers. 

Sharkey said the amendment had been reintroduced as “no discernible progress” had been made after a report from Martin Lewis and the London School of Economics (LSE) was published with a series of recommendations on how to help mortgage prisoners. 

He said the Treasury said it would arrange an urgent meeting to discuss the report following its publication, but this never took place. 

Sharkey said: “Capping at two per cent over the base rate would return the margins to what they were prior to the financial crisis. 

“The amendment does not single out mortgage prisoners for help that is not available to other borrowers in the active market. It just ensures that mortgage prisoners are able to access fixed rate deals on the same terms as others in the active market.” 

Baroness Chapman noted that despite the amendment passing in the House of Lords in 2021, it was rejected by the House of Commons at a time when “a much larger proportion of the population was experiencing issues with mortgage affordability”. 

She added: “The government urgently needs to get a grip on the issues facing the mortgage market generally and, once that situation has calmed, we hope they will be able to do what they can to ease the difficulties faced by mortgage prisoners.” 


‘A divide between consumers’ 

Baroness Penn said the government was taking the issue “extremely seriously” and working with the Financial Conduct Authority and the industry in general. She said the government was “carefully considering” the recommendations made in the LSE report but said some proposals would not be effective. For example, she said, it would not be able to help those with interest-only mortgages. 

Penn also said any proposals must “deliver value for money, be a fair use of taxpayer money and address any risk of moral hazard”. 

She added: “However, it is important that we do not create false hope and that any further proposals deliver real benefit and are effective in enabling those affected to move to a new deal with an active lender, should they wish to. 

“An SVR cap would create an arbitrary division between different sets of consumers, and it would also have significant implications for the wider mortgage market that cannot be ignored. It is therefore not an appropriate solution, and I must be clear that there is no prospect of the government changing this view in the near term.” 

Sharkey said it was the government’s fault that mortgage prisoners were in that position as the Treasury sold loans to closed book lenders. He said he was still “uncertain” as to what the government would do as there seemed to be no concrete plan. 

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