In a written statement ahead of his resignation this morning, John Glen, economic secretary to the Treasury said that a cap on SVR for inactive firms would be an “unprecedented market intervention”.

He added: “It would entail risks to the financial stability of firms which would be unable to vary their rates in line with their costs of funding and would be deeply unfair to borrowers in the wider mortgage market who pay similar rates to mortgage prisoners.”

In a written answer to shadow defence minister, Chris Evans, Glen said that SVRs charged by inactive firms were “in line with those paid by borrowers in the active market”.

He said that the government would continue to examine what “further practical and proportionate solutions” there are to help mortgage prisoners who “do not pose unacceptable financial stability risks or are unfair to other borrowers in the mortgage market”.

Last year, regulator, the Financial Conduct Authority (FCA) published a review of mortgage prisoners which found there were 47,000 mortgage prisoners who could benefit from switching to a mortgage deal but were considered too high risk despite keeping up-to-date with payments.

Sponsored

Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind

Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with

Sponsored by Post Office

The report also found that only 200 borrowers on closed and inactive books switched onto new deals following the FCA’s change that allowed lenders to alter their affordability assessments.

Glen echoed the findings of the review which suggested the reasons behind mortgage prisoners being unable to switch were “complex and varied”. These included there being a high proportion of interest-only mortgage borrowers with no clear repayment plan, or pre-financial crisis legacy issues such as self-certification of income.

He said: “A comprehensive understanding of the circumstances of mortgage prisoners is therefore crucial in progressing work and the FCA’s review provides the key insight necessary to facilitate this.

“Following this and previous interventions to help borrowers switch, the government is working with industry to determine if any further solutions can be found to help mortgage prisoners.”

‘Tsunami of repossessions on the horizon’

Many mortgage prisoners originated from mortgage books the government took over during the financial crisis, including Bradford and Bingley and Northern Rock. Following a change in the affordability assessment rules which came into force in 2014, firms applied stricter lending criteria to mortgage borrowers.

Campaign group UK Mortgage Prisoners said 250,000 homeowners have been trapped paying extortionate rates since the financial crash in 2008, and these borrowers are “overwhelmed by a cost-of-living crisis and interest rate rises”.

A spokesperson, said: “John Glen compares SVRs in closed books with the active market. The issue is those in closed books cannot access fixed rate products available in the active market so to compare mortgage prisoner rates with active SVRs is not appropriate. We are not in an ‘active market’ and a cap on closed books would not impact the wider market as claimed.

“Our members are overwhelmed by a cost-of-living crisis and interest rate rises, we live crisis within crisis after over a decade of unfair treatment. There is a tsunami of repossessions on the horizon with almost one million pre-crash interest only loans maturing over the next decade. It is high time victim blaming and repeated feeble excuses were left behind by the government and replaced with action.”