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Treasury to intervene on mortgage prisoners


The Treasury is investigating how to help hundreds of thousands of mortgage prisoners trapped in their deals following the Mortgage Market Review.

The Chancellor met with Money Saving Expert’s Martin Lewis today on the issue and other industry experts have been raising this with the Treasury.

So-called transitional arrangements written into the MMR allow lenders to waive affordability checks for existing borrowers who may be trapped by the rules as long as the customer does not wish to borrow more money, there is no “material impact” on affordability and they have a good payment history.

Smaller lenders have generally been more willing to use the arrangements but big lenders have come under fire for not applying them, despite being publicly criticised by the FCA.

The MMR allowed lenders to apply the rules to their own customers and customers coming from rivals.

However, the Mortgage Credit Directive, which came into effect in March, dictates that lenders must apply an affordability test on borrowers who switch over from a rival, although borrowers staying with the same lender are not affected.

Association of Mortgage Intermediaries chairman Pat Bunton, who has campaigned fiercely on this issue, says: “It is great George Osborne is taking an interest in this. There is a whole bunch of people who have been left stranded by lenders and the excuses now being given around MCD requiring an affordability test on every case is a joke. There is nothing that actually stipulates what that affordability test should be.”

Think-tank The Resolution Foundation estimates one in 10 borrowers could potentially be trapped on their deals, which it says works out at around 770,000 households.

The Treasury confirmed the meeting took place but could not reveal what steps the Government will take.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Too little to late. The damage has been done and homes have been lost. The ombudsman when asked to intervene in my case accepted that the lenders were not at fault and accepted the situation as ‘fiscal leverage’ being the phrase used. The lender particularly Santander use the excuse that the customer has a choice knowing full well this was not the case due to product removal or affordability uploading. I did a little test with a lender I already had £100k with they offered 25K based on alleged affordability under this enquiry yet I earned 5 times more than when the initial mortgage was arranged. Due to imposed SVR as mortgage prisoner my personal loss was 18k over 4 years having not had access to better rates due to the above yet had no defaults, earned 5 times more than when taken out so had to sell to clear and start again as affordability tests would not allow as self employed are no longer mortgagable.
    Its blackmail Jim but not as we know it!

  2. Isn’t it amazing that everything thing the FCA do in terms of interfering with financial advice and now mortgage advice needs the government to try to intervene due to the harm caused by the very people charged with consumer protection.
    The FCA is as dysfunctional as the FSA was. How Osborne and co can let this organisation away with what it has for so long is disgusting.

  3. Yes, mad financial damage caused to many mortgage prisoners already done through stupid application of “the rules”. A massive example of regulation and compliance meant to protect the public achieving the opposite.

  4. David Bettley 12th May 2016 at 5:29 pm

    Borrowers trying to port really beneficial “Interest Only” rates – BOE base + 0.50% – 1% are routinely denied the facility and forced into capital repayment loans or “stress tested” at Current variable rate + 3% – surprise, surprise the lender off loads the client to another lender or at very least starts to increase their profit by getting the capital repaid.
    The biggest scandal is ageism and the lending terms applied to borrowers who work well past state retirement age even if they have assets and plan to downsize. Age 74, Northwest, £1m property, £160k interest only loan, Company Director working full time with good income. Forced to re-mortgage or convert to very short term capital repayment loan – WHY – because Lender has agreed lending policy with authorities. IF they “underwrite” outside policy they are subject to exceptional scrutiny coupled with inability/unwillingness of Lenders to delegate ability to vary standard lending terms. If you are hitting your lending targets who cares about the casualties !

  5. Steven Pearman 12th May 2016 at 8:57 pm

    Legitimate self employed people who declare their income are as able as anyone to get a mortgage. Those that think it’s okay to freeload of taxpayers are victims of their dishonesty, nothing more.

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