Mortgage Prisoners

Paul Scully Excerpts

Thursday 6th June 2019 Commons Chamber

[Paul Scully (Sutton and Cheam) (Con)]

There have been some differences of opinion on how to pronounce Cerberus. I am going to go with Cerberus, the hound of Hades, but of course that will be a moot point by the time people read this in Hansard.

I congratulate my hon. Friend the Member for Dover (Charlie Elphicke) on securing this debate from the Backbench Business Committee, and on the fantastic work that he has been doing with colleagues, and with the Opposition Member, the hon. Member for Feltham and Heston (Seema Malhotra). This has been a truly cross-party initiative, to raise the issue of the some 200,000 people affected by this problem across the country. I know that the Minister is listening, and I know that, judging by our past discussions and debates, he has been open to solutions—and looking for solutions—to tackle the difficult banking issues that he has to cover within his remit.

In the Gallery today there are several mortgage prisoners, including my constituent Juliet Peddle. Juliet and her husband took out her mortgage back in 2002 with Northern Rock, and every two years she was able to transfer automatically on to the lowest two-year rate; so she was always going to have that automatic review, ensuring that she had as affordable a mortgage as possible. When Northern Rock failed, she ended up, after the various exchanges, with Cerberus. I am not sure that Juliet knows—I certainly do not—how it was decided which mortgages went down which route, so that some ended up with Cerberus. It seemed to be a bit of a lottery. It means that she and her husband, like many other self-employed people—her husband is a self-employed black cab driver—are locked into the affordability rules, mainly because Cerberus does not have any alternative products. There is nowhere else for her to go within the company.

The BBC alleged in a 2018 “Panorama” programme that Cerberus had told the Government, before it made its bid for the Northern Rock loan book, that it intended to offer better mortgage deals and evolve into a challenger bank. I am interested to know whether the Minister has any insight into whether that offer was actually made. If it was, it clearly has not been adhered to some three years later.

We have heard why this has happened. The Government reforms back in 2014 allowed lenders to waive the affordability requirements for new and existing customers who were remortgaging but not increasing the size of their debt. Unfortunately, as we have also heard, the EU mortgage credit directive, which came into force in 2016 and with which we have to comply until at least 31 October—this is not my leadership bid—prevents lenders from waiving the requirements when a borrower moves to a new lender. That undermines the Government’s reforms by further restricting how mortgage prisoners can or cannot move in terms of their future mortgage. We know that, at present, lenders are able to waive affordability requirements only for existing customers, which does not help Juliet.

We have talked about the voluntary agreement that the FCA has built up and to which 67 lenders have signed up, but again, because Cerberus does not have alternative products for her and her husband to move to, it will not help Juliet. I am interested to hear what the Minister can say to Juliet and all the other mortgage prisoners here today and across the country who are desperate for help. Many of them can afford to keep up their payments, but why should they be paying three times the rate that the rest of us can pay on the open market? It needs to be fair, and it needs to be a level playing field. I hope the Minister will have some answers for Juliet and the Members who have raised this issue today.