Mortgage prisoners: Government promises to consider proposals to free trapped borrowers
The Government has today confirmed that it will "carefully consider" the costed and practical proposals for freeing mortgage prisoners put forward in the recently published report by the London School of Economics and Political Science (LSE).
Responding to a written Parliamentary question today (7 March), economic secretary to the Treasury Andrew Griffith said: "The Government understands that being unable to switch your mortgage can be extremely stressful. We will consider the proposals put forward in this very recently published report carefully."
The LSE report, which was commissioned by MoneySavingExpert.com and funded by a private donation of almost £60,000 by Martin Lewis, is the third and final one in the series and was launched at a Parliamentary event last week.
For more on the history of Martin and MSE's campaign, and what limited help you can get if you're affected, see our Mortgage prisoners guide.
Key proposals from the LSE report
The report put forward a number of possible solutions that would help prisoners eventually remortgage with active lenders. The Government has now committed to considering these proposals, which include:
- Free comprehensive financial advice for all prisoners (required for any borrower who might go on to access other solutions).
- Interest-free equity loans to clear the unsecured element of Northern Rock's 'Together' loans.
- Government equity loans on the model of Help to Buy, interest-free for the first five years.
- Fallback option: A Government guarantee for active lenders to offer prisoners new mortgages.
For more detail about the report's key findings and recommendations, see our Final mortgage prisoner report launch MSE News story.
Who are mortgage prisoners?
Mortgage prisoners are home loan borrowers who have been trapped on high rates since the 2008 financial crisis. Many have loans that were sold by the state to 'closed book' inactive lenders – largely investment companies that are not regulated to lend new mortgages – making it difficult for them to move to cheaper rates.
Prisoners have suffered financially, mentally, and physically for more than a decade. The horror of being unable to escape unaffordable mortgages has had a devastating impact on many. In the past year, near-monthly rises have seen some prisoners' rates leap from 4.5% to as much as 8.29%.