Mortgage Prisoners

George Eustice Excerpts

Thursday 6th June 2019 Commons Chamber

[George Eustice (Camborne and Redruth) (Con)]

I congratulate my hon. Friend the Member for Dover (Charlie Elphicke) on securing this debate and commend the work of the APPG on fair business banking, and in particular the work of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake).

I have always had an interest in modernising the regulation of our banks. Indeed, in 2010 I introduced a private Member’s Bill—the Secured Lending Reform Bill—that sought to rectify a major deficiency in the law, which is that banks can currently repossess commercial property without even having to go to court to get a possession order. The power that our law grants lenders to repossess property is a rather extraordinary power that should be used lightly, and we should put in place protections for those who offer a lender a charge over their home or other property as a result of that lending. This debate also affects a type of secured lending: mortgages where the home is offered as security. I believe that people who offer their home as security should enjoy special privileges and rights.

I recently had a very sad case in my constituency that is relevant to the issue of mortgage prisoners. My constituent had taken out a mortgage in 2007 with North Yorkshire Mortgages. The circumstances behind that were not altogether happy. This gentleman needed to buy a new bungalow because his son had tragically suffered a sporting accident, and they needed a new property that he could access. His father was also ill, so there were many pressures on the family at that time. Tragically, his son passed away three years later. We all know that bereavement can be difficult, especially the loss of a child, and that affected my constituent’s ability to work at the same level, which affected the household income.

After the first five years, the promotional rate on this interest-only mortgage expired, and it reverted to the standard variable rate of 5.5%. That put pressure on the household finances even further, but when he approached North Yorkshire Mortgages about a switch to a more affordable product, he was told that he could not switch to an affordable product because his income was too low. As my hon. Friend the Member for Dover pointed out, as perverse outcomes of such regulations go, it does not get much worse than this. We are saying to people, “Your income is too low to be able to pay less, so instead we are going to sting you on the standard variable rate.”

My conclusion from all this is that we should revisit the regulations issued by the FCA and reconsider the approach. In particular, the voluntary agreement proposed by UK Finance last year should be placed on a statutory footing. It should not just be a voluntary thing that lenders can opt into. There should be a statutory obligation on them to offer their existing customers a switch to a more affordable product.

If that is something the Government are unwilling to consider, I have a second proposal, with which I will conclude. It is that the Government should, at the very least, issue new guidance to the courts or put in place new regulations under the Administration of Justice Acts to make it clear to the courts that, when assessing any application for a possession order from a lender, there should be a powerful presumption against granting any repossession order where a customer has been refused the ability to switch to a more affordable product. The reality is this: there will be instances where people have fallen into arrears and ended up facing repossession of their home where the lender itself has been culpable in that default and in the repossession proceedings. In my view, our law should have a powerful presumption against granting any repossession order where a switch to a different product has been refused, and I think that would focus the minds of lenders.