The group has launched a campaign, the Mortgage Reform Bill, proposing legislative changes to stop borrowers from being stuck on standard variable rates (SVRs) and selling residential mortgages to non-lenders.
The group said it was aware that there were times when a person would choose to be on an SVR, but said lenders should allow them to transfer to a new fixed rate if they request one. They said giving mortgage prisoners access to fixed rates would be a “means of attempting to rectify some of the wrongs of the past” and a relief to borrowers.
It also said the circumstances of borrowers that had fallen into arrears since 2021, when rates started rising, should be considered.
Blocking sales to inactive entities
UK Mortgage Prisoners said residential mortgages should only be held by firms that lend in practice, and mortgages sold by active lenders should not be sold to lenders with no new products.
The group said this would be in line with fair treatment and Consumer Duty guidelines.
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It said having a subsidiary holding company within an active lender parent company was “unfair” because borrowers from inactive lenders did not have the same access to products despite being under the same firm.
UK Mortgage Prisoners said many borrowers on inactive books would fail the current affordability test for the mortgage they were paying and called for an extended modified affordability.
It said the enhanced assessment introduced by the regulator went some way towards addressing this but was not sufficient, particularly in the case of interest-only borrowers where they were not required to demonstrate a repayment plan.
Relieving interest-only borrowers
The group suggested the creation of a new policy to protect the homes of older people trapped on an interest-only mortgage after the financial crash and being unable to switch due to new criteria.
It said these borrowers should be “grandfathered” and allowed to stay in their homes on average market fixed rates, not lifetime mortgage rates, while continuing to pay the interest with an option to pay down the capital if they can.
The capital would be repaid when the mortgage-holders die and any surplus would be paid to the next of kin, the group suggested.
It said people should be able to transfer a mortgage into their name solely if they can prove they have been independently making payments following the breakdown of a relationship.
UK Mortgage Prisoners also asked for the introduction of a compensation scheme for affected borrowers.
The early day motion was submitted this week and could result in the issue being debated in the House of Commons.
The motion text said the House understood that almost 200,000 mortgage prisoners were “still suffering severe financial hardship due to decisions made by the Government and regulator in the course of bailing out the banks following the 2008 global financial crash”.
It said it believed “urgent action must be taken to address the injustice that so many have suffered through no fault of their own and rather as a consequence of sales of mortgages to non-lenders, repeated securitisation and regulatory changes further trapping many thousands of historical interest-only customers.”
