Commons Sense

House of Commons · Westminster Hall

Mortgage Prisoners

28 June 2023 · 6 other contributors · 10,768 words

Opened by Martin Docherty SNP West Dunbartonshire

Responding minister: Andrew Griffith

EconomyHousing

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Martin Docherty raised concerns about mortgage prisoners in Westminster Hall. A government minister responded.

Key points

  • MP expressed astonishment and anger over the situation faced by mortgage prisoners unable to switch lenders due to high interest rates on SVRs.
  • MP highlighted a case of constituent Chris Dorman, who took out a mortgage in 2003 and faced increased principal and fees, leading to negative equity by 2029.
  • MP called for a moratorium on evictions for mortgage prisoners and a cap on SVRs offered to victims.

Key requests to Government

The MP called for a moratorium on evictions for mortgage prisoners, a cap on SVRs offered to victims, and cross-party work to assist those trapped in closed-book prisons.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Martin Docherty SNP West Dunbartonshire

The MP expressed astonishment and anger over the situation faced by mortgage prisoners, who are unable to switch lenders due to high interest rates on standard variable rates (SVRs). He highlighted a specific case of his constituent Chris Dorman, who took out a mortgage with Northern Rock in 2003 and was forced onto an interest-only plan when the bank collapsed in 2007. Despite not falling behind on payments, Chris faced fees and increased principal owing to actions by UK Asset Resolution (UKAR) and later Heliodor, which is owned by Topaz Finance Ltd. The principal owed rose by nearly £10,000 within a few years, pushing Chris into negative equity and threatening his family home in 2029.

Other contributors (6)
  • Chris Stephens SNP Glasgow North West

    Chris Stephens highlighted that up to 40,000 people in Scotland are mortgage prisoners due to closed book mortgages or stringent borrowing criteria. He criticised the Government for not taking action and mentioned a London School of Economics report proposing solutions costing between £50 million and £348 million over ten years.

  • Duncan Baker Con Orpington

    Discussed the plight of mortgage prisoners, citing a constituent paying £1,782 monthly with an arrears situation under a Heliodor mortgage at 9.24%, highlighting the hardship faced by those affected and the need for compassion.

  • James Murray Lab Co-op Ealing North

    James Murray discussed the impact of rising interest rates on mortgage holders and private renters, highlighting that around 200,000 people are estimated to be mortgage prisoners in the UK. He urged the Treasury to follow a plan set out recently to help mortgage holders through difficult times.

  • Philip Hollobone

    The hon. Gentleman congratulated the lead MP, highlighted a constituent's situation who is one of 200,000 mortgage prisoners across the country and has not missed any payments or been in arrears but faces an almost 8% variable rate due to LTV ratio constraints.

  • Seema Malhotra Lab Co-op Feltham and Heston

    The hon. Member thanked the lead MP for securing the debate, acknowledged their work on mortgage prisoners, and supported calls for a cap on SVRs at 2% above the base rate. Ms Malhotra expressed concern about mortgage prisoners, highlighting the impact of rising interest rates on families and individuals who are trapped in high-cost mortgages. She mentioned that her constituent Mr Masood had brought this issue to her attention five years ago, leading to the establishment of an all-party parliamentary group (APPG) on mortgage prisoners. The APPG has heard from many affected people, including those struggling with health issues or facing repossession due to exploitative practices by inactive lenders and vulture funds. Ms Malhotra criticised both the Financial Conduct Authority (FCA) for not intervening more effectively and the Government for selling mortgages to entities that are exploiting mortgage prisoners through high interest rates. Seema Malhotra thanked the Minister for acknowledging the work of the all-party parliamentary group and urged the Government to be bold in finding a solution, working with the regulator. Recognises the need for both short-term measures and long-term solutions for mortgage prisoners, emphasising that these individuals are not people who have fallen on hard times but professionals who have been affected by circumstances beyond their control. She also suggests sharing the experience of her constituents with the Financial Ombudsman Service (FOS) to find constructive ways forward.

  • Paul Beresford Con Mole Valley

    The MP thanked the lead speaker for raising awareness about mortgage prisoners and expressed his support.

Government Response

Andrew Griffith

It is a pleasure to see you in the Chair, Mr Robertson. I congratulate the hon. Member for West Dunbartonshire on securing the debate. Our primary role as we represent our constituents is to use our voice to ensure that nobody feels forgotten. The Government recognises the anxiety people have about mortgages and will use tools at their disposal to limit rate rises. There are no easy answers, but this debate proves Parliament's ability to compel Ministers to account for themselves. The Minister acknowledges the work of Rachel Neale and others in the Public Gallery continuing with the campaign. He is humble about potential Government failings and recognises that every human process is fallible as seen in the Horizon scandal involving postmasters. The Minister will continue to keep an open mind on such issues. The debate addressed mortgage prisoners who have been in this situation for a long time, including Chris from the hon. Member's constituency. The Government and I recognise the anxiety that people have about mortgages, and we will use the tools at our disposal to limit the rise in rates. There is no one-size-fits-all solution; each case varies based on individual circumstances. The FCA's analysis recognises varied circumstances leading individuals to their current situation. The Government are committed to looking for practical and proportionate options where they can deliver genuine benefits for groups of borrowers, ensuring fairness and parity across different groups in society. However, the Minister notes that there cannot simply be a solution if somebody is on an interest-only mortgage with no plan to repay the principal. The Government want to ensure maximum number of options to switch are available. The idea of a cap on standard variable rate for mortgage prisoners was discussed but rejected by the Government as it would not be appropriate and might create false expectations. On moratoriums, existing pre-action protocols apply. Remedies through the Financial Ombudsman Service (FOS) exist and will be worked with to ensure this point is understood. The Minister acknowledges the recommendation from the LSE for free comprehensive financial advice which reflects the bespoke nature of some problems. The Government provides significant independent financial advice free at the point of use, budgeted at £93 million annually through the Money and Pensions Service. He wants to explore mortgage prisoners' experience accessing this advice. The Minister understands the distress people find themselves in due to rising rates and commits to working on it further. A global cap on standard variable rate is not the right answer; looking at individual cohorts would be better. The Government will continue dialogue with all parties, industry, and the Financial Conduct Authority (FCA) to bring forward solutions where possible. The Minister aims to defuse some of the deleterious impacts on people by getting more the ability to switch. Finally, from a broader economy perspective, efforts will be made to bear down on inflation and interest rates.

Get updates like this by email
▸ Assessment & feedback
Summary accuracy