Financial Services Bill — House of Commons, 2021-04-26
Topic: Housing
John Philip Glen (Conservative, Centre-right): I thank my hon. Friend, who, without equal in this House, has done so much to champion mortgage prisoners. I hope he will carry on working with us as we continue to improve our understanding and the quality of the data that could underpin further interventions I can reaffirm to the House today that my own, and this Government’s, commitment is as strong as it ever has been to finding further solutions that do not provide false hope to borrowers, but I am afraid that amendment 8 represents neither a proportionate nor practical response on this complex issue. I will address the two sections of the amendment in turn. First, the amendment seeks to cap the standard variable rate, or SVR, that inactive firms charge borrowers. This would be an unprecedented intervention in the mortgage market and is a completely disproportionate approach when the data shows that the 55,000 borrowers to which I referred pay on average 0.4 percentage points more than similar borrowers in the active market. Such drastic Government intervention should not be undertaken lightly, as it could have significant impacts above and beyond the effect that the amendment seeks. That cap would be deeply unfair to borrowers in the active market who are in arrears or unable to secure a new fixed-rate deal, because the cap would not include them. Let us consider two hypothetical borrowers. The first borrower took out their mortgage prior to the financial crisis when, as my hon. Friend said, there were looser affordability requirements. They borrowed, in some cases, 125% of the property’s value, avoiding the need to save a deposit. Shortly after, their lender failed and had to be nationalised. The second borrower took out their mortgage following the financial crisis, when there were stricter affordability requirements. They saved a deposit of 5% or perhaps even 10%, and then were able to buy their home. Let us say that both those borrowers lost their jobs and now work in lower-paid jobs. They live in an area where property prices have not grown as much as they would have liked. Both try to keep up with their repayments, but ultimately fall into arrears, with the result that neither can easily access new deals. Neither of those borrowers has done anything wrong, and both deserve support from their lender and the wider financial system, but the Government cannot possibly agree with the idea that one should be supported by an unprecedented market intervention of this kind, and the other not. Both adhered to the prevailing conditions at the time I am also concerned that any cap on standard variable rates, including one only applicable to inactive lenders, would have unintended consequences for financial stability. The London School of Economics agreed and did not recommend a cap, noting that it could cause market harm. It would restrict lenders’ ability to vary rates in line with market conditions—the ability to vary SVRs allows lenders to re-price products to reflect changes to the cost of doing business—and could therefore create risks with significant implications for financial stability The second part of the amendment would require new fixed-rate deals to be offered to borrowers with inactive lenders, although it is unclear how that is to be achieved. Lending remains a commercial decision based on a variety of factors and it would not be right for the Government to compel lenders to provideproducts for specific groups. If the amendment is intended to require the current holders of these mortgages to offer new products, that would require firms that do not currently have the lending expertise, systems or regulatory permissions necessary to offer new mortgage products to do so. However, in opposing the amendment, I reiterate once again my commitment to continue to find further practical and proportionate options for affected borrowers, supported by facts and evidence, as I have over the past three years. Equally, I do not want to give false assurances, or false hope, for the sake of political expediency, especially when it is likely that there is a limit to what further action the Government can take to support such borrowers.