Mortgages (Switching)

Martin Docherty-Hughes Excerpts

1st reading
Monday 11th March 2024 Commons Chamber

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I beg to move,

That leave be given to bring in a Bill to make provision for the purpose of enabling certain mortgage borrowers to switch to a new mortgage arrangement; and for connected purposes.

Let me take this opportunity to thank the UK Mortgage Prisoners campaign group, which has assisted me in bringing this Bill to the Floor of the House—specifically, Rachel Neale and Jill Hulme, who are in the Special Gallery. I am very grateful to them and to their team.

An estimated 200,000 people across the UK, including 40,000 Scots, are deemed to be mortgage prisoners, thought to be at risk of losing their homes. Many have been stuck on high street rates since the financial crisis of 2008, and have been unable to switch due to toughened borrowing criteria. In January, during a session of Prime Minister’s questions, the Prime Minister assured me that the UK Government are aware of the difficult situation facing mortgage prisoners and would be taking action, yet last week the Chancellor failed to introduce measures to tackle the issue. It is scandalous that, yet again, the spring Budget has ignored the plight of tens of thousands of individuals and families unfairly trapped on crippling mortgage rates.

As the UK Government sit on their hands, having made billions from the sale of closed mortgage books, mortgage prisoners face losing their homes through no fault of their own. One has to beg the question of this unfettered capitalism: how many people have been made homeless since the financial crash, and indeed how many have lost their lives?

The Bill that I am introducing to Parliament today aims to finally end the unfair 16-year financial injustice and address the failures of successive Conservative and Labour Governments. Let us not forget that for well over a decade the UK Government were the ultimate holders of the mortgages through UK Asset Resolution. I can imagine thinking that no Government would do anything deliberately to harm the hundreds of thousands of UK residents in that position, and that a sensible resolution would eventually be found. Sadly, it was not a purgatory before things got better. Indeed, they were to get worse.

In 2019, UKAR sold a tranche of books, including some of my constituents’ mortgages, to a company called Heliodor Mortgages, which I have mentioned previously. My constituents had never heard of it, and with good reason: it is not an entity that I or anyone else in this House could borrow from. It is a vehicle that exists to service the existing Northern Rock mortgages. Although Heliodor does operate in a regulated market, its ultimate owner, Topaz Finance, is not a regulated entity and relies on third-party administrators who are regulated by the Financial Conduct Authority in order to comply with its regulations. Significantly, as a London School of Economics report by Kath Scanlon et al. points out, the setting of standard variable rate mortgages is not a regulated activity, meaning that a business opportunity for morally ambivalent vulture funds such as Topaz has been created, and people—our constituents—are offered up as hosts for parasites.

Despite never having fallen behind on their payments, our constituents find themselves subject to a host of fees and other spurious admin charges. Incredibly, the amount that some of my constituents owed rose by almost £10,000 in a couple of years, with no additional lending offered. They were pushed into negative equity as the amount they owed Heliodor became greater than the value of their property.

The cruellest part of this sorry tale of modern Britain is this: one of my constituents is approaching the end of the 25-year term of their mortgage, but as they were forced into the interest-only plan, just a few short years after they began to make repayments, they now risk losing the family home of a quarter of a century unless they can come up with the full amount owed to Heliodor.

The aspect I find most galling is the inversion of the principle of home ownership, whereby people have ended up paying what is essentially rent to a vulture fund, which almost certainly knows it will be able to acquire the property at the end of the term. Topaz Finance will have been licking its lips, I am sure, at a deal that basically guarantees that it will be paid twice: first, through the monthly payments that my constituents have been making; and secondly, when it sells their home from under them in 2029 at a healthy profit over what it picked the property up for in 2019.

The long tail of the era of neoliberal economics is still pernicious, because there is a confusion between concepts such as taxpayer value and what any of us would think they actually mean. To people like me, taxpayer value is not found in pauperising hundreds of thousands of households, nor is it to be found in scraping back every single penny that taxpayers saw spent on ensuring that the economy did not collapse overnight. To this old-fashioned social democrat, government is not a bank, with shareholders that need to see the principal of its loans paid back in full; it is an institution that is able to intervene in the economy at strategic moments. That is an idea that I think is slowly coming back into fashion, but I wonder how many of our national assets have found their way into the paws of that type of offshore capital in the intervening 40 years, leaving taxpayers with all of the costs, none of the benefits, and absolutely hee-haw value. That is why this Bill is essential: not only to hold this Government to account, but to shine a light on the fiscal approach of the loyal Opposition.

The Bill seeks to end evictions for mortgage prisoners. Let us do what we can to lift the burden that they have carried over the years. I know from reading briefings that the Government are concerned about what they call the moral hazard of acting. If these people have not already had their houses repossessed by 2024, they must necessarily have kept up with their repayments, so there is a strong case for saying that the moral hazard lies in the other direction—companies have been deliberately stringing our constituents along.

It is surely also natural to put a cap on the SVRs being offered to mortgage prisoners, especially given the general climate of mortgage instability. Our constituents have been coping with high interest rates for over a decade, and we gain nothing from pushing them further into debt. Of course, there will be a cost to the taxpayer in the abstract, but this move will be an investment that pays itself back through the cascade of money into our local economies, instead of into the pockets of offshore vulture funds. I am afraid that the day of balance-sheet economics needs to end.

Finally, the Government owe it to mortgage prisoners to find a way for them to help themselves out of this mess. They should look into providing a vehicle that allows our constituents who are mortgage prisoners to pivot back into the mainstream market. The first suggestion of the report published by the LSE is that there should be free, comprehensive financial advice for all victims—that is what they are. Almost 200,000 people who are victims should be contacted individually to help them navigate their way out of the quagmire that they find themselves in. As I said, it gives me no pleasure to conclude that it appears there is nothing we can do to make up for what UK Mortgage Prisoners calls the

“extortionate interest rates, severe financial restrictions and mobility and mental & physical issues caused by this Government-made scandal.”

However, that does not mean that we should not try.

Question put and agreed to.

Ordered,

That Martin Docherty-Hughes, Alison Thewliss, Liz Saville Roberts, Claire Hanna, Stewart Hosie, Ben Lake, Amy Callaghan, Sammy Wilson, John McDonnell, Duncan Baker and Caroline Lucas present the Bill.

Martin Docherty-Hughes accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 14 June, and to be printed (Bill 175).