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

Study aims to uncover economic cost of freeing them vs the price of leaving them locked in for life in face of Government inaction

The UK’s biggest consumer website, MoneySavingExpert.com (MSE), today announces plans to try to help 170,000 people trapped in their mortgages, as the Government has failed to do so. MSE’s campaigns team has instructed the London School of Economics and Political Science (LSE) to carry out new research which will look for palpable solutions which could unchain ‘mortgage prisoners’. This is personally funded by a five-figure donation from MSE’s founder and chair Martin Lewis (via his charitable fund).

This research is the latest step in Martin and MSE’s campaign. The aim is to find evidence-based policy solutions, which will push the Government to step in and rescue mortgage prisoners that the financial regulator can’t reach.  

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 unregulated, inactive lenders who have no other mortgage 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 those unfairly trapped in their current deal, often with an inactive or unregulated lender, sometimes paying far higher rates than they need to. They are rejected for all remortgages (cheaper mortgage deals elsewhere) because they don’t meet strict borrowing criteria brought in after the financial crash – even though they are keeping up with repayments. Many have also told MSE of the extreme emotional and physical burdens of the situation they have been left in.

MSE has been campaigning to free mortgage prisoners since 2015. The regulator, the Financial Conduct Authority (FCA), has done everything it can within its authority, after last year it announced relaxed affordability checks for new customers who meet certain criteria and want to remortgage. But last month, it confirmed that lenders aren’t interested in helping mortgage prisoners switch with the solution it’s been able to offer, leaving the regulator at the end of its powers.

MSE has repeatedly called for the Government to take action. While Economic Secretary to the Treasury John Glen MP this week indicated he is open to considering extending the FCA’s remit to help, so far the Treasury has made no practical attempt to find a way to release the 170,000 still stuck in this financial trap.

 

-ends-

Notes to editors

MSE’s mortgage prisoner campaign timeline:

  • In 2015, Martin Lewis met key figures in the EU, the Treasury and the FCA, which are the organisations responsible for UK mortgage regulations.
  • In 2016, then-Chancellor George Osborne wrote to mortgage lenders following a meeting with Martin about the plight of mortgage prisoners. He confirmed that lenders don’t have to carry out affordability assessments for their existing customers seeking a product transfer.

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 2018, Treasury Minister John Glen MP admitted that mortgage prisoners “need to be dealt with” at an event run by MoneySavingExpert.com at the Conservative Party Conference Fringe.

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 2019, the FCA launched a consultation detailing its solution to free mortgage prisoners.
  • 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.