MPs have set up an all-party parliamentary group (APPG) to explore ways to help mortgage prisoners who are stuck paying high interest rates because they’re unable to switch to better deals.
Among the group’s first plans is to launch a short inquiry to decide how the group should respond to the Financial Conduct Authority’s (FCA’s) Mortgages Market Study final report, which was published at the end of March.
The city regulator’s study suggested lending rules could be relaxed to make it easier for borrowers with unregulated or inactive lenders to switch to a more competitive mortgage deal.
The founding members of the new APPG are Seema Malhotra MP and Charlie Elphicke MP. Elphicke last week read a 10-minute bill in the House of Commons recommending that affordability tests are scrapped in favour of “grandfathering” affected borrowers so that they can move to better deals.
It’s estimated that around 150,000 homeowners who are currently trapped paying high mortgage rates because they don’t meet strict affordability criteria introduced following the 2014 Mortgage Market Review. Many of these took out mortgages prior to the financial crisis when lending criteria was much more relaxed. Around 120,000 are customers of firms which aren’t authorised to lend.
Some of these borrowers have been told they can’t afford new deals due to current lending rules, even though their monthly payments would be less than on their existing deals. Mr Elphicke described the current situation as “absurd and unfair”, telling parliament: "The rules say that they cannot afford payments on a mortgage at, say, 2%, so they are forced to continue with a mortgage paying 5% or more."
Parliamentary group set up to help mortgage prisoners