Martin Lewis, Money Saving Expert, is well-known for providing tips and tricks to Britons with their finances, however, he also campaigns on key issues. Martin has highlighted the issue of mortgage prisoners with the website he founded tackling the issue since 2015. Mortgage prisoners are described as people who are unable to leave current lenders due to circumstances which are out of their control.
This may be due to a lender becoming inactive, or unable to authorise new products.
However, ultimately, this could result in Britons paying higher rates, as borrowing criteria has been toughened since the financial crisis.
Pressure has recently mounted when it comes to mortgage prisoners, as certain organisations have called for a cap on rates to protect those locked into arrangements.
However, there is also an argument that a cap on Standard Variable Rates (SVR), may not be enough to support mortgage prisoners.
READ MORE: IR35 changes to occur as Rishi Sunak pushes ahead – impacts explored
The discussion on mortgage prisoners comes as Lord Stevenson tabled an amendment to the Financial Services Bill on the matter.
The amendment, debated in the House of Lords, would cap the costs which borrowers are forced to meet with inactive lenders.
Those unable to switch would have their rate capped at two percentage points above whatever the Bank of England base rate is at the time.
Martin continued: “Coupled with the devastating impact of the pandemic on people’s finances, urgent action is needed to prevent the situation from becoming catastrophic.
“The independent LSE report I funded has a cogent argument as to why an SVR cap isn’t a balanced long-term solution.
“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All Party Parliamentary Group (APPG) on mortgage prisoners is pushing it.
“This would provide immediate emergency relief to those most at risk of financial ruin.
“No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”
The Financial Conduct Authority introduced modified affordability rules in 2019, which enabled lenders to alter their assessments for mortgage prisoners who meet certain criteria.
Towards the end of 2020, four lenders confirmed these modified assessments have been adopted, in a win for mortgage prisoners.
West Brom Building Society, for example, stated transfers have been completed for a “handful” of mortgage prisoners.
It is hoped the discussion of the matter in the House of Lords, however, will be the next step to liberating Britons from arrangements they are currently trapped in.
Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip