Mortgages: Cerberus

Lord Sharkey Excerpts

Wednesday 28th November 2018 Lords Chamber

Asked by

[Lord Sharkey]

To ask Her Majesty’s Government what action they intend to take to ensure that those holding mortgages sold by UK Asset Resolution to Cerberus receive a fair deal, and are able to access good value fixed rate mortgages.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government believe that better deals should not be beyond the reach of customers who continue to pay their mortgage. The Treasury is working closely with the Financial Conduct Authority and industry to explore what options are available to help customers with inactive lenders. In the meantime, Landmark Mortgages Ltd, which manages mortgages and was sold by UKAR to Cerberus in 2015, is an FCA-regulated organisation and is bound by the FCA principle of treating customers fairly.

[Lord Sharkey (LD)]

My Lords, after Northern Rock went bust, many of its mortgages were sold by UK Asset Resolution to Cerberus, an American hedge fund not authorised by the FCA. At the time, UK Asset Resolution said that returning those borrowers to the private sector would mean that they would be offered new deals, extra lending and fixed rates. This was completely untrue. Instead, about 100,000 borrowers were trapped. They continue to pay very high interest and are not allowed by Cerberus to have a fixed-rate mortgage. Many are now in deep financial difficulty. Can the Minister tell those mortgage prisoners when they may be rescued from Cerberus and what lessons UK Asset Resolution has learned from this sorry episode?

[Lord Bates]

The noble Lord is right to highlight that this traces back to 2008 and the financial crisis, when we had immense irresponsibility in the mortgage lending system. Some mortgages were offered at 120% of the value of the mortgage, allowing people to self-certify their income. Those mortgages, banks and institutions were then rescued. As a result of state aid rules, they were then unable to offer new mortgages. The mortgage prisoners, to use the noble Lord’s term, were then doubly blighted by the fact that in the intervening time, the European Union mortgage credit directive came into effect, which introduced an affordability test which meant that they could not apply to transfer to another lender to achieve a mortgage at a lower rate—they were indeed trapped.

We have tried to find how we can help that situation. We are working with the FCA—we are aware of the representations being made—and will continue to do so. My honourable friend the Economic Secretary to the Treasury will be writing further on this important issue.