Mortgage Prisoners

Debate between Martin Docherty-Hughes and Seema Malhotra

Wednesday 28th June 2023 Westminster Hall

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

I beg to move,

That this House has considered mortgage prisoners.

It is good to see you in the Chair, Mr Robertson. I want to begin this vital debate with something of a confession: like most Members, I did not know too much about mortgage prisoners until just a couple of weeks ago. While I understand that many here today will have been working away on the issue for a while and may be members of the all-party groups, I am still in a state of astonishment and, frankly, anger that the situation happened in the first place and has been perpetuated, I have to say, by successive British Governments.

While it may be convenient to lay these problems at the current tired Government’s door—I hope the Minister will take that in the way it is meant—many of the disastrous decisions that brought this about took place under the previous Labour Government and have simply been rolled over in more than a decade of what seems like unbearable mental torture for those who are stuck in this predicament.

Let me thank my constituent Chris Dorman from Duntocher for allowing me to bring this issue before the House and for agreeing to share their story and that of their family so publicly. I am only sorry that in instances like this, we as MPs so often find it difficult to address historic injustices and can only highlight them and hope that the Government of the day will listen.

Before I tell Chris’s story, I want to be clear at the outset about the questions to which I would like answers from the Minister. I think we now need to also ask the shadow Minister, the hon. Member for Ealing North (James Murray), to consider them. Can we have a moratorium on evictions for mortgage prisoners? Can we put a cap on the standard variable rates being offered to victims? Will the Government—and, I hope, the official Opposition—pledge to set up a vehicle to work cross-party for those in closed-book prisons to pivot back into the mainstream market? Those are three fairly straightforward asks, to which the Minister can now take over an hour to find an answer; I may go on for some time. I know that those watching at home, including Chris and his family, will really appreciate an answer.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank the hon. Member for securing the debate, and as the founder and co-chair of the all-party parliamentary group on mortgage prisoners I thank him for the work he is doing on the issue. The last Labour Government introduced a consultation to ensure that there was some protection for people when mortgages were sold on, and those measures were pulled away when the Conservatives came into power. Does he agree that we need to go back to those considerations? I support what he said about the cap on SVRs—the APPG has been calling for a cap of 2% above the base rate.

[Martin Docherty-Hughes]

I thank the hon. Member for that intervention. I will go on to the history of some of this. I hope that the APPG agrees not only about a cap on the standard variable rate, but about the other two issues I highlighted. I would be happy to work with the all-party group in future.

Let me turn to my constituent Chris Dorman. I have known Chris and his family over many years, especially his mum Rose, who was and remains to this day a legend in the history of my home town, Clydebank—a working-class history that is so seldom related or reflected in a place such as this. She was one of the founding members of the first credit union in Scotland, the Dalmuir Credit Union, helping countless families just like the one I grew up in. I was member 507; that takes me back some time.

That is relevant—and I hope the Minister will understand this—because we need to begin any discussion about mortgage prisoners with the firm rebuttal of any idea that these people are bad borrowers who are to blame for their own predicament. Chris comes from a family who know how mortgages work and how people should go about choosing a lender and a product that will not cause problems for them or their family in future scenarios. When he took out the mortgage with Northern Rock in 2003 to buy a flat, I do not doubt that he would have kicked the tyres of the agreement and known where to look for potential pitfalls. Of course, he would not have found any.

Northern Rock was a triple A lender, one of the largest lenders in the country and a fast-growing national presence that still had its roots in the north-east of England. I know about this because I got my first mortgage with Northern Rock at around the same time—and believe me, this is the point where I start to think, “There but for the grace of God go I.” I do not think it will be the last time in this debate when that is my overriding emotion.

In 2007, as Northern Rock crumbled in the bank run that heralded the next year’s financial crash, Chris was forced on to an interest-only plan. Although for many people switching to an interest-only payment is a stopgap because of short-term financial circumstances, for people in Chris’s position it has been the beginning of their problems. That entirely understandable decision has rendered them unable to change their lender, as many of us do these days, and move to a more attractive rate.

Instead, through the actions of the now nationalised Northern Rock, Chris was flung to the mercy of a standard variable rate that began to diverge significantly from the Bank of England’s average SVR. The decision was quite deliberate. During a period when we were all dealing with the most significant global recession for decades, people like Chris were having to come to terms with that extra dollop of uncertainty. They probably did not know it at the time, but what would initially have felt like a short-term inconvenience was turning into an actual prison, even if there were already some organisations sounding the alarm.

Like so many, and some of our own constituents, Chris was forced to persist with an entirely inconvenient and increasingly costly arrangement and unable to switch to a better deal, making a mockery of the idea of home ownership and the free market being liberating for individuals and families. Through the last decade he has been paying the 6% or 7% interest rates that many of us now complain of today.

This is where we begin to see a bit of the societal impact of the policy. The village of Duntocher, where Chris lives, is a fairly normal part of my constituency socioeconomically. It has poverty and wealth; it is not the wealthiest part of West Dunbartonshire. It is a community—it was an ancient Roman site and then a mill town that predates Clydebank itself—that has a lot of small locally owned businesses, which would have benefited from the thousands of pounds each year that Chris and his family were overpaying on their mortgage.

Let us not forget that for well over a decade the UK Government were the ultimate holders of that mortgage, through UK Asset Resolution. I can imagine myself thinking that the Government would not do anything so deliberately to harm the hundreds of thousands of UK residents in this position and that a sensible resolution would eventually be found. As we will see, there were numerous attempts to address the issue through the various Conservative Governments we have lived through so far. It was not a purgatory before things got better. They were about to get worse.

In 2019, UKAR sold a tranche of books, including Chris’s, to a company called Heliodor. He had never heard of it, and with good reason, because it is an entity that neither I nor any of us here could borrow from. It is a vehicle that exists solely to serve the existing Northern Rock mortgages. Although it operates in a regulated market, Heliodor’s ultimate owner, Topaz Finance Ltd, 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.

However, and significantly in Chris’s case, as Kath Scanlon et al’s report from the London School of Economics points out, the setting of SVRs 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 a parasite.

Despite never having fallen behind on his payments, Chris found himself subject to a host of fees and other spurious admin charges. Incredibly, the principal he owed rose by almost £10,000 in a few short years, with no additional lending being offered. That pushed Chris into negative equity, as the amount he owed Heliodor became greater than the value of the flat he shares with his wife.