Mortgage Prisoners — House of Commons, 2019-06-06
Topic: Housing
Rushanara Ali (Labour, Centre-left): I congratulate the hon. Member for Dover (Charlie Elphicke), who sits on the Treasury Committee with me, and other hon. Members on securing this important debate There is something especially cruel about the way people have found themselves trapped in these mortgages—these much more expensive mortgages—that have already been described. They took mortgages out before the financial crisis—banks lent them the amount they borrowed—but following changes to the affordability tests they are now no longer eligible for mortgage rates that are a lot cheaper. As others have said, they are therefore trapped in more expensive mortgages that are costing them thousands of pounds a year These are not the super-rich or the privileged; they are decent, hard-working customers who cannot switch to a more affordable mortgage, even though they have mostly been able to pay. People who have struggled and whose homes are under the threat of repossession are those whose circumstances have changed, but despite what has been happening they have largely kept up with their mortgages, even though that is costing them tens of thousands of pounds. However, that has led to enormous hardship, as the Minister has already heard both here and in various Committees, while other representations have also been made to him and his colleagues As I have said, many young people who took out mortgages before the crisis are being punished because the regulations have changed. Understandably, those changes to regulations were about sorting out and learning the lessons from the financial crisis, but they have found themselves caught in the middle, unfairly and unjustly, with the unintended consequence of leaving them trapped in this situation. As the hon. Gentleman has said, in 2016 the Government sold off £13 billion of Northern Rock mortgages to Landmark Mortgages, which is owned by the US equity company Cerberus. This represents a huge error in public policy and, as others have said, it should form part of an inquiry into what went wrong, what we need to learn from this and how we prevent these errors from affecting many thousands more people in the future According to a "Panorama" programme, the US firm misled Ministers and officials on mortgages. Our Government believed in the undertaking that these people would have access to mortgages and competitive rates of interest, and that that would be honoured, but it has not been. Inactive lenders, such as Cerberus and even the Government firm UK Asset Resolution, are not authorised to offer mortgage products to their customers who are stuck with high interest rates As has already been said, the FCA estimates that between 120,000 and 150,000 people are stuck in this predicament. Only about 10,000 people may be supported, leaving many tens of thousands more stuck. Some people have paid £40,000 more—or more—in interest than they would have done if they were on a cheaper mortgage interest rate of, say, 2%. This is desperately unfair There are many heart-breaking stories, and we have already heard some of them today. One of the widely reported cases was that of Lisa and Mark Elkins. They have had to pay £2,500 a month on their mortgage because their interest rate is now nearly 5%, which is three times the best rate available in the market at the time the report was provided. Lisa and Mark had to borrow tens of thousands of pounds that they would not have had to borrow had they had access to alternative, cheaper, rates. It is not acceptable for people to have to live like that when, through no fault of their own, they find themselves in that predicament It is concerning that the Government’s latest sell-off of NRAM mortgages was to the inactive lender Citi because—as colleagues have highlighted—they were unable to find an active lender for the deal. It is frankly irresponsible of the Government to pursue such sales, and it sets a dangerous precedent. The Government must consider this issue comprehensively and protect other consumers, as well as addressing the issues affecting current mortgage prisoners With other colleagues, I have raised in the Treasury Committee the plight of mortgage prisoners. The Minister probably thinks that I sound like a broken record when he appears before that Committee, but this has gone on for more than a decade. The reality is that the FCA has not acted—it has been too slow. Thanks to pressure from Members across the House, the FCA has finally stepped in to address the affordability test, and the Minister has responded reluctantly, grudgingly, gradually and in a piecemeal way that seems indicative of a number of Ministries at the moment. Perhaps Ministers are distracted by a talent show that is currently going on, but I hope this Minister will carry on working and build on what he has done so far I appeal to the Minister to ensure that the change in the affordability test from an absolute one to a relative one is meaningful. The danger is that the FCA will wriggle out of this—frankly, the FCA has been utterly complacent, and it should not have taken so long. The danger is that the FCA will advise banks to provide for these mortgage prisoners, but that there will be no teeth to that advice and banks will not be required to apply the affordability test as a relative test. We will still be stuck in the same position, and very little will change. Will the Minister assure the House that he will instruct the FCA to take this issue seriously and ensure that the affordability test is meaningful, rather than trying to push aside MPs who have been campaigning on this issue by giving them something that looks mildly satisfactory but does not change anything for our constituents who are suffering As others have said, the bigger issue at stake is the regulation of mortgage providers. The Government must look thoroughly at how thousands of people are protected, because mortgages are long-term loans. If the rules change in the middle of a long-term loan agreement, those retrospective changes make things very difficult for people and inevitably lead to a trap, and that must be understood and addressed. I hope the Minister will take this issue seriously and protect those who are currently trapped in high-cost mortgages, and that he will also look to the future and be proactive in protecting thousands of others who may find themselves at risk because of decisions that his Department and Government might have made. The Government were warned, but those warnings were not heeded. I hope they will be today.