MSE News

Martin Lewis to fund large-scale research to help free 170,000 mortgage prisoners

Martin Lewis to fund large-scale research to help free 170,000 mortgage prisoners

A new study at the London School of Economics and Political Science (LSE), funded by MoneySavingExpert.com founder Martin Lewis, will look to find solutions to unchain 170,000 'mortgage prisoners'.

The research is the latest step in Martin and MoneySavingExpert's long-running campaign to help homeowners trapped on expensive mortgages.

Its aim is to find evidence-based policy solutions, which will push the Government to step in and rescue the mortgage prisoners that the financial regulator can't reach.

The study will be personally funded by a donation of around £25,000 from Martin, through his charitable foundation.

Martin: 'The impact of leaving people locked in to unaffordable mortgages can be catastrophic'

Martin Lewis, founder of MoneySavingExpert.com, said: "It's time the Government accepted the responsibility to find a solution for these vulnerable consumers. Its failure to do so is short-sighted. The cost of mortgage prisoners doesn't just fall on the individuals, it falls across society.

"The impact of leaving people locked in to unaffordable mortgages can be catastrophic. It can leave them dependent on the state, with little savings for old age, and even adding to NHS costs with the hideous and disastrous mental health impact that can occur when you destroy someone's financial life choices.

"So over the next few months, we're asking the LSE to explore a range of cost-effective, practical policy solutions the Government could employ to rescue mortgage prisoners – which we can then take to the Treasury.

"I won't pre-empt their work, but it'll include a feasibility study of solutions – for example, subsidising competitive lenders to enable them to offer mortgage prisoners a decent deal. Then I hope where possible that can be compared to the cost to the economy of doing nothing – and leaving mortgage prisoners locked in for life or losing their homes.

"It's worth remembering that the Government spent billions bailing out one set of victims of the financial crash – the banks. Yet it's done nothing to help another set – those locked into high-rate mortgages.

"In fact it's actually responsible for some of their pain, selling the mortgage customers of former lenders like Northern Rock and Bradford & Bingley to inactive lenders, who have no other mortgage products, or firms who are not authorised to offer new products, leaving these mortgage prisoners with no option other than to try to afford to keep paying obscene rates."

What are mortgage prisoners?

'Mortgage prisoners' are homeowners who are unfairly trapped on an expensive mortgage, often with inactive lenders, who have no other mortgage products, or firms who are not authorised to offer new products.

They're unable to remortgage to a cheaper deal with another lender because they don't meet strict borrowing criteria brought in after the financial crash – even though they're keeping up with repayments and would often be paying less if they switched. Many have told us of the emotional and physical impact of this situation.

MoneySavingExpert.com has been fighting their corner since 2015, and last year the Financial Conduct Authority (FCA) announced relaxed affordability checks for new customers who meet certain criteria and want to remortgage – but while it has done everything within its authority, last month it confirmed that lenders aren't interested in helping mortgage prisoners switch with the solution it's been able to offer.

MSE has repeatedly called for the Government to take action. Last week, Treasury Minister John Glen suggested he was open to extending regulation to help mortgage prisoners – but it seems no practical steps have been taken.

What is being done to help mortgage prisoners?

MoneySavingExpert has been fighting for justice for mortgage prisoners for several years now through the route of seeking reform of regulation and laws. Here's a quick recap:

  • In 2015, Martin met key figures in the EU, the Treasury and the FCA, which are the organisations responsible for UK mortgage regulations. He attempted to organise a summit between them to collectively work out who was responsible for the situation and how it could be fixed. Unfortunately, the summit didn't take place.

  • In 2016, then-Chancellor George Osborne wrote to mortgage lenders following a meeting with Martin about the plight of mortgage prisoners. However, Martin said the Chancellor's letter only addressed "a fraction of the problem".

  • In May 2018, the FCA found 150,000 consumers in the UK were mortgage prisoners. MSE contributed to the regulator's discovery by suggesting and helping facilitate a survey of mortgage brokers. The survey backed up the regulator's findings from analysing mortgage data, and the FCA thanked MSE for its contribution.

    The regulator said it was able to help 30,000 of the mortgage prisoners it identified, whose lenders the FCA could force to help their 'imprisoned' consumers if needed. But the other 120,000 'prisoners' have had their mortgages bought by firms who aren't authorised to lend, and so the FCA has no power to make them do anything.

  • In October 2018Treasury Minister John Glen admitted that mortgage prisoners "need to be dealt with", at an event ran by MoneySavingExpert at the Conservative Party Conference.

    The minister also expressed agreement with Martin's call that an affordability check for someone with an existing mortgage – if it's at a cheaper rate and they're not borrowing more – should be: 'Have you repaid and not defaulted?'

  • In March 2019the FCA launched a consultation detailing its solution to free mortgage prisoners. It proposed that lenders could choose to carry out a more "proportionate" affordability assessment for those who are up to date with their payments, aren't looking to borrow more and are looking for a better mortgage for their current home.

  • In July 2019, MSE submitted its response to the FCA consultation, welcoming it, but calling for improvements. Crucially, MSE called on the Government to step in and help those mortgage prisoners beyond the reach of the regulator.

  • In October 2019the FCA removed some barriers that stop mortgage prisoners from finding a cheaper deal – though many will still be left trapped.

  • In January 2020, FCA research found there were 250,000 people whose mortgages were with inactive or unregulated lenders. Of these, 170,000 were up to date with payments.