Martin Lewis: Stop handing mortgage prisoners 'life sentences'

Martin said that some mortgage holders are being "punished for being with a lender that went bust" as they are unable to remortgage with the firm their mortgage was sold to.

He voiced his concerns to the minister and Treasury Committee chair Nicky Morgan during MoneySavingExpert.com's event The Mortgage Ticking Timebombat the Conservative Party Conference yesterday. 

Who are 'mortgage prisoners'?

Mortgage prisoners are those who've been told they 'can't afford' to remortgage even though they are keeping up with their payments and want to switch to a CHEAPER rate.

An EU rule called the Mortgage Credit Directive means – at least in the UK's interpretation – anyone applying for a mortgage is subject to strict affordability checks scrutinising their income and outgoings, even if they already have a mortgage and are now applying for a cheaper one.

MoneySavingExpert has been fighting to help mortgage prisoners for several years now – Martin criticised the directive back in 2015 in his blog: I'm taking on the EU Mortgage Credit Directive – it's going to create many mortgage prisoners.

Back in May, a report from the Financial Conduct Authority (FCA) pledged to help 30,000 of these mortgage prisoners who are with lenders that are authorised to offer mortgage products. But it also estimated that there were 120,000 more people who couldn't get a cheaper deal than the one they're currently on because they have a mortgage which has been sold to a firm which isn't authorised to offer new deals.

Mortgage prisoners with lenders that don't offer new products are stuck

UK Asset Resolution (UKAR) is a state-owned holding company created to manage and sell the mortgage books of defunct lenders Bradford & Bingley and NRAM (formerly part of Northern Rock).

But it has sold tens of thousands of these residential mortgages to companies which are unauthorised to, or can't, provide mortgages, and so can't offer alternative products to those customers whose mortgages are sold to them.

In some cases customers can switch to another provider, but those who can't meet lending affordability criteria are left stuck on expensive deals – even when other cheaper deals could be available.