Martin Lewis' call for 'urgent action' to help mortgage prisoners debated in House of Lords as peers propose interest rate cap
MoneySavingExpert.com founder Martin Lewis has had his pleas for more help for mortgage prisoners heard in the House of Lords this week, as new rules were proposed which could see interest rates capped for some.
So-called 'mortgage prisoners' are homeowners who are unable to remortgage to a cheaper deal with another lender because they don't meet strict borrowing criteria, even though they'd often be paying less if they switched. Martin and MoneySavingExpert.com (MSE) have campaigned for years for more help for those who are stuck.
On Wednesday, a statement from Martin was read out in the House of Lords after Labour peer Lord Stevenson tabled an amendment to the Financial Services Bill. The amendment had been suggested by the All-Party Parliamentary Group on Mortgage Prisoners. If passed, it would bring in a cap on the standard variable rate (SVR) of interest for mortgage prisoners in 'closed books' - ie, those borrowing from a firm which no longer lends to new customers. The proposed cap is no more than 2% above the Bank of England base rate (currently 0.1%).
The amendment was debated, but has not been voted on yet – this is now likely to happen in the Bill's 'Report' stage, which could be before recess, which starts on 25 March, or after the House returns on 12 April. There’s no guarantee it’ll become law even if it’s passed by the House of Lords, as the House of Commons will also need to vote on it. A similar amendment was debated on but not taken forward by the House of Commons earlier this year.
During this week's debate, various peers, including the Liberal Democat Lord Sharkey, voiced their support for MSE's mortgage prisoner campaign. Lord Sharkey said he hoped the Chancellor Rishi Sunak and economic secretary to the Treasury John Glen would recognise “their continuing moral obligation” to take action.
It comes after Martin pressed the Chancellor on the issue in his post-Budget interview with him last week. The Chancellor praised Martin and MSE's work on the issue, describing an LSE report on mortgage prisoners which was funded by Martin as "informative", andhe agreed that there was a need to "make sure we have workable solutions" to help all mortgage prisoners.
Martin: 'Urgent action is needed'
During the debate, Lord Sharkey read out a statement from Martin which he made ahead of the amendment being tabled. Martin said: "While the Government chose to bail out the banks in the financial crisis, it has never bailed out the banks' customers who were victims of that collapse. Mortgage prisoners have been left paying obscene interest rates for over a decade, through no fault of their own.
"They have been completely trapped in their mortgages and unable to escape the financial misery it causes. Coupled with the devastating impact of the pandemic on people's finances, urgent action is needed to prevent the situation from becoming catastrophic.The independent LSE report I funded has a cogent argument as to why an SVR cap isn't a balanced long-term solution.
"Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I'm very happy the All-Party Parliamentary Group on Mortgage Prisoners is pushing it. This would provide immediate emergency relief to those most at risk of financial ruin. No one should underestimate the threat to wellbeing and even lives if this doesn't happen, and happen soon."