In a letter to the UK Mortgage Prisoner Action Group following a meeting in January, Bim Afolami said the government was “committed to reviewing the relevant affordability regulations” for mortgage prisoners so there were “no regulator barriers preventing consumers from switching and to ensure lenders can take into account prior repayments when assessing affordability”.
He pointed to the Modified Affordability Assessment introduced in 2019 as a measure that allows “lenders to disapply usual lending rules for mortgage prisoners who are up to date with payments”.
Afolami said that, from a regulatory perspective, he was satisfied that there were “no further changes to affordability assessments” that could assist mortgage prisoners beyond those that the Financial Conduct Authority (FCA) had taken.
He admitted that the group who had benefitted from the intervention was small, but said that the decision to lend to borrowers was a matter for lenders, and the government “cannot force lenders to lend to borrowers who the lenders consider too high-risk”.
Afolami said that efforts should be made to “raise awareness and use of the flexibility” allowed under the regulator’s rules when assessing affordability, adding that UK Finance was talking to the industry to help closed-book lenders engage with borrowers and to help move them to the open market.
Looking at the Mortgage Reform Bill, he said that he was “confident” that regulation already offered “flexibility”, reiterating that neither the government nor the FCA could “force lenders to offer new lending”.
Govt happy to take ‘hands-off approach’ with mortgage prisoners
In response to the letter, the UK Mortgage Prisoner Action Group said that, despite earlier engagement in January from Afolami, his response showed that he was “toeing the line of his predecessors”.
It stated that it showed that the government has “absolutely no ideas, no solutions and nothing to offer to either right past wrongs or bring any resolution to the current desperation suffered by mortgage prisoners”.
The group said that moving to an active market lender seems to be the “only single-track mindset of government”, which was unaware of the many obstacles in the way for this being feasible for many mortgage prisoners.
It added that Afolami was “silent on anything other than 2019 modified affordability and fails to even address the remainder of our proposals”.
The letter continued on to say that the UK Finance initiative to engage with closed-book lenders was not “well-received by our mortgage prisoner members being directed by the very vulture funds who profiteer from them to selected equity release firms”.
“Mortgage Prisoners are highly educated in their financial options, or lack of same, and do not welcome direction from those recommended by their current administrators,” it noted.
The group said that the All Party Parliamentary Group for Mortgage Prisoners had “received an equally negative response” from Afolami yesterday after seeking an update on the Treasury’s response to the London School of Economics report furnished by Martin Lewis last year.
It said the “sole takeaway” for the Treasury was to examine how mortgage prisoners could better interact with debt advice, which it said was “insulting”.
The group said that it would respond in detail to the Treasury, but it was “abundantly clear that our asks go far beyond the 2019 modified affordability”.
“We have met with FCA and received correspondence from them yesterday reaffirming that government legislative intervention is required to give effect to several of our proposals. Mr Afolami has not addressed these, and in the meantime, mortgage prisoners continue to suffer detriment of entrapment on standard variable rates (SVRs) and loss of their homes,” it said.
The letter continued on to say that the government had intervened in the mortgage market previously, but was taking on a “hands-off approach when it comes to rectifying the wrongs of the creation of mortgage prisoners caused by successive governments’ management of our mortgages”.
“It is a fact that the UK mortgage market operates on the basis of short-term fixed rate switches, and it is unconscionable that our members have been sold on and securitised to entities that offer no new rates, and this is not considered breach of contract by the Financial Ombudsman Service. Regrettably, Mr Afolami’s words and actions do not match up.
“We hope borrowers across the entire market are aware that to this day their mortgages can be sold on or securitised and managed by non-lending administrators who offer only standard variable rates,” it said.
The letter concluded that it would continue with group legal action led by Harcus Parker, expressing gratitude for the introduction of the Mortgage Prisoner Bill and reiterating that it would continue to campaign for better treatment.
