Asked by: Angela Eagle (Labour - Wallasey)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether his Department has made an assessment of the potential merits of incorporating closed book mortgages into existing mortgage regulatory frameworks.
Answered by Andrew Griffith - Shadow Secretary of State for Business and Trade
The Financial Conduct Authority’s (FCA) review into mortgage prisoners, published in November 2021, found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.
The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no silver bullet to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers.
The Government has already worked with the FCA to implement changes to its mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.
Ultimately, the pricing and availability of mortgages is a commercial decision for lenders in which the Government does not intervene. As such, the Government cannot force lenders to lend to borrowers that sit outside of their risk appetite.
Any further work on this issue must consider the impact and practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. There is no evidence, for instance, that consumers have experienced detriment that would be resolved by an extension of the regulatory perimeter. It is also worth noting that the Standard Variable Rates (SVRs) charged by inactive firms are in line with those paid by borrowers in the active market. The Government remains open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market.
More broadly, the Government understands that people across the UK are worried about the cost of living. That is why we have announced £37 billion of support for the cost of living this financial year. We have also taken decisive action to support millions of households with rising energy costs this winter through the Energy Price Guarantee and the Energy Bill Relief Scheme. Millions of the most vulnerable households will receive £1,200 of support this year, with additional support for pensioners and those claiming disability benefits.
When mortgage borrowers are in financial difficulty and struggling to pay their mortgage, FCA guidance requires firms to provide support through tailored forbearance options. The Government also offers support to borrowers through Support for Mortgage Interest (SMI) loans to homeowners in receipt of an income-related benefit, and protection in the courts under the Mortgage Pre-Action Protocol.
Asked by: Angela Eagle (Labour - Wallasey)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment his Department has made of the potential merits regulating interest-only mortgage lenders’ adjustment of variable rates.
Answered by Andrew Griffith - Shadow Secretary of State for Business and Trade
The Financial Conduct Authority’s (FCA) review into mortgage prisoners, published in November 2021, found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.
The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no silver bullet to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers.
The Government has already worked with the FCA to implement changes to its mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.
Ultimately, the pricing and availability of mortgages is a commercial decision for lenders in which the Government does not intervene. As such, the Government cannot force lenders to lend to borrowers that sit outside of their risk appetite.
Any further work on this issue must consider the impact and practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. There is no evidence, for instance, that consumers have experienced detriment that would be resolved by an extension of the regulatory perimeter. It is also worth noting that the Standard Variable Rates (SVRs) charged by inactive firms are in line with those paid by borrowers in the active market. The Government remains open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market.
More broadly, the Government understands that people across the UK are worried about the cost of living. That is why we have announced £37 billion of support for the cost of living this financial year. We have also taken decisive action to support millions of households with rising energy costs this winter through the Energy Price Guarantee and the Energy Bill Relief Scheme. Millions of the most vulnerable households will receive £1,200 of support this year, with additional support for pensioners and those claiming disability benefits.
When mortgage borrowers are in financial difficulty and struggling to pay their mortgage, FCA guidance requires firms to provide support through tailored forbearance options. The Government also offers support to borrowers through Support for Mortgage Interest (SMI) loans to homeowners in receipt of an income-related benefit, and protection in the courts under the Mortgage Pre-Action Protocol.
Asked by: Angela Eagle (Labour - Wallasey)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether his Department plans to introduce new measures to support mortgage prisoners in response to increases in the (a) base rate and (b) cost of living.
Answered by Andrew Griffith - Shadow Secretary of State for Business and Trade
The Financial Conduct Authority’s (FCA) review into mortgage prisoners, published in November 2021, found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.
The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no silver bullet to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers.
The Government has already worked with the FCA to implement changes to its mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.
Ultimately, the pricing and availability of mortgages is a commercial decision for lenders in which the Government does not intervene. As such, the Government cannot force lenders to lend to borrowers that sit outside of their risk appetite.
Any further work on this issue must consider the impact and practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. There is no evidence, for instance, that consumers have experienced detriment that would be resolved by an extension of the regulatory perimeter. It is also worth noting that the Standard Variable Rates (SVRs) charged by inactive firms are in line with those paid by borrowers in the active market. The Government remains open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market.
More broadly, the Government understands that people across the UK are worried about the cost of living. That is why we have announced £37 billion of support for the cost of living this financial year. We have also taken decisive action to support millions of households with rising energy costs this winter through the Energy Price Guarantee and the Energy Bill Relief Scheme. Millions of the most vulnerable households will receive £1,200 of support this year, with additional support for pensioners and those claiming disability benefits.
When mortgage borrowers are in financial difficulty and struggling to pay their mortgage, FCA guidance requires firms to provide support through tailored forbearance options. The Government also offers support to borrowers through Support for Mortgage Interest (SMI) loans to homeowners in receipt of an income-related benefit, and protection in the courts under the Mortgage Pre-Action Protocol.
Asked by: Justin Madders (Labour - Ellesmere Port and Bromborough)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent assessment he has made of the potential implications for his policies towards mortgage prisoners of the report by the Financial Conduct Authority entitled Mortgage Prisoner Review, published on 29 November 2021, in the context of recent increases in mortgage interest rates.
Answered by Andrew Griffith - Shadow Secretary of State for Business and Trade
The Financial Conduct Authority’s review into mortgage prisoners, published in November 2021, found that the population of mortgage prisoners is varied and complex. There is no single measure to address the circumstances of this population of mortgage holders.
Where mortgage borrowers are in financial difficulty and struggling to pay their mortgage, Financial Conduct Authority guidance requires firms to provide support through tailored forbearance options. The Government has also taken a number of measures aimed at helping people to avoid repossession, including Support for Mortgage Interest loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.
More broadly on cost-of-living support, the Government has taken immediate action to help households through the Energy Price Guarantee and the Energy Bills Support Scheme. This is in addition to the £37 billion of targeted support for the cost of living this financial year.
Asked by: Justin Madders (Labour - Ellesmere Port and Bromborough)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent assessment his Department has made of the potential impact of increases in the cost of living on mortgage prisoners.
Answered by Andrew Griffith - Shadow Secretary of State for Business and Trade
The Financial Conduct Authority’s review into mortgage prisoners, published in November 2021, found that the population of mortgage prisoners is varied and complex. There is no single measure to address the circumstances of this population of mortgage holders.
Where mortgage borrowers are in financial difficulty and struggling to pay their mortgage, Financial Conduct Authority guidance requires firms to provide support through tailored forbearance options. The Government has also taken a number of measures aimed at helping people to avoid repossession, including Support for Mortgage Interest loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.
More broadly on cost-of-living support, the Government has taken immediate action to help households through the Energy Price Guarantee and the Energy Bills Support Scheme. This is in addition to the £37 billion of targeted support for the cost of living this financial year.
Asked by: Virginia Crosbie (Conservative - Ynys Môn)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what discussions he has had with the UK Mortgage Prisoners Support Group on the (a) depth and (b) severity of the situation people unable to move out of high interest loans are facing.
Answered by Richard Fuller - Shadow Chief Secretary to the Treasury
Ministers last met with UK Mortgage Prisoners earlier this year and exchange regular correspondence with them.
The Government has worked with the Financial Conduct Authority (FCA) on interventions to help mortgage prisoners switch. Resources have also been put in place so that mortgage prisoners can understand their options better, including their ability to switch, and access guidance through MoneyHelper. These resources can be found online at: https://www.moneyhelper.org.uk/en/homes/buying-a-home/help-for-mortgage-prisoners.
Asked by: Chris Evans (Labour (Co-op) - Caerphilly)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to the Financial Conduct Authority's Mortgage Prisoner Review published on 29 November 2021, what assessment he has made of the implications for his policies of the findings of that report.
Answered by John Glen
In November 2021, I laid before Parliament a review on the issue of mortgage prisoners conducted by the Financial Conduct Authority (FCA). This review found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.
The review makes clear that the reasons mortgage prisoners are unable to switch are complex and varied, including a high proportion of interest-only mortgage borrowers with no clear repayment plan and pre-financial crisis legacy issues such as borrowers self-certifying their income on their loan applications. A comprehensive understanding of the circumstances of mortgage prisoners is therefore crucial in progressing work and the FCA’s review provides the key insight necessary to facilitate this. Following this and previous interventions to help borrowers switch, the Government is working with industry to determine if any further solutions that can be found to help mortgage prisoners.
This further work must consider the practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. A cap on the Standard Variable Rates (SVRs) charged by inactive firms would be an unprecedented market intervention and would undermine the principle of risk-based pricing which underlies the mortgage market. It would entail risks to the financial stability of firms which would be unable to vary their rates in line with their costs of funding and would be deeply unfair to borrowers in the wider mortgage market who pay similar rates to mortgage prisoners. It is worth noting that the SVRs charged by inactive firms are in line with those paid by borrowers in the active market.
The Government continues to examine what further practical and proportionate solutions existing to help mortgage prisoners which do not pose unacceptable financial stability risks or are unfair to other borrowers in the mortgage market.
Asked by: Chris Evans (Labour (Co-op) - Caerphilly)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to cap standard variable mortgage rates for inactive lenders to protect people who cannot move their mortgages.
Answered by John Glen
In November 2021, I laid before Parliament a review on the issue of mortgage prisoners conducted by the Financial Conduct Authority (FCA). This review found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.
The review makes clear that the reasons mortgage prisoners are unable to switch are complex and varied, including a high proportion of interest-only mortgage borrowers with no clear repayment plan and pre-financial crisis legacy issues such as borrowers self-certifying their income on their loan applications. A comprehensive understanding of the circumstances of mortgage prisoners is therefore crucial in progressing work and the FCA’s review provides the key insight necessary to facilitate this. Following this and previous interventions to help borrowers switch, the Government is working with industry to determine if any further solutions that can be found to help mortgage prisoners.
This further work must consider the practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. A cap on the Standard Variable Rates (SVRs) charged by inactive firms would be an unprecedented market intervention and would undermine the principle of risk-based pricing which underlies the mortgage market. It would entail risks to the financial stability of firms which would be unable to vary their rates in line with their costs of funding and would be deeply unfair to borrowers in the wider mortgage market who pay similar rates to mortgage prisoners. It is worth noting that the SVRs charged by inactive firms are in line with those paid by borrowers in the active market.
The Government continues to examine what further practical and proportionate solutions existing to help mortgage prisoners which do not pose unacceptable financial stability risks or are unfair to other borrowers in the mortgage market.
Asked by: Richard Holden (Conservative - Basildon and Billericay)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the potential effect of trends in the level of interest rates on people who are mortgage prisoners.
Answered by John Glen
Ministers and officials meet regularly with industry, trade bodies, and regulators to understand their policies and the impact of the increased cost of living on all mortgage borrowers. I am also in regular contact with mortgage prisoner campaigners about their concerns.
The Treasury continues to work with industry to determine if there are any further solutions which would meaningfully benefit mortgage prisoners and are fair to other borrowers in the wider mortgage market, including those who are also paying variable rates.
The Government continues its efforts to support mortgage borrowers by offering Support for Mortgage Interest (SMI) loans to homeowners in receipt of an income-related benefit to help prevent repossession. Recently, the Prime Minister announced a package of homeownership measures, including changes to SMI Loans. When introduced, these changes will provide support more quickly to homeowners by reducing the qualifying period for SMI loans and remove the ‘zero earnings rule’. There is also protection in place in the courts under the Mortgage Pre-Action Protocol which stipulates that repossession should always be a last resort for lenders.
On the cost of living more broadly, the Government has introduced over £15bn of additional support, targeted particularly at those with the greatest need. This package builds on the over £22bn announced previously, with government support for the cost of living now totalling over £37bn this year. Millions of the most vulnerable households will receive at least £1,200 of one-off support in total this year to help with the cost of living.
Asked by: Nicholas Brown (Independent - Newcastle upon Tyne East)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what support he is making available for people who are mortgage prisoners and are subject to significant payment rises.
Answered by John Glen
The Government has worked with the Financial Conduct Authority (FCA) on changes to regulation, making it possible for lenders to offer products to a greater number of mortgage prisoners. We have also put resources in place so that mortgage prisoners can understand their options better, including their ability to switch, and access advice through MoneyHelper.
The Treasury continues to work with industry to determine if there are any further solutions which would meaningfully benefit mortgage prisoners and are fair to other borrowers in the wider mortgage market, including those who are also paying variable rates.
On the cost of living more broadly, the Government has introduced over £15bn of additional support, targeted particularly at those with the greatest need. This package builds on the over £22bn announced previously, with government support for the cost of living now totalling over £37bn this year. Millions of the most vulnerable households will receive at least £1,200 of one-off support in total this year to help with the cost of living.