Mortgage prisoners could soon be set free

A new bill, designed to set mortgage prisoners free, has been presented to the House Of Commons by Tory MP Charlie Elphicke.

Presented as a 10 minute rule bill, it is seen as the first step to releasing more than 200,000 consumers who have been trapped for years in high rate mortgages because they are unable to switch to a cheaper deal.

Crazy situation

The MP for Dover and Deal described it as ‘a crazy situation’, adding: “Mortgage prisoners are people who are trapped by changes in mortgage regulation.

“The rules say that they cannot afford payments on a mortgage at, say, 2%, so they are forced to continue with a mortgage paying 5% or more. It’s plainly absurd and unfair.”


If the bill passes into law it would force lenders to treat such customers as ‘grandfathered’ which is an exemption allowing a mortgage holder to switch without meeting the new regulations brought in by the Mortgage Market Review (MMR) of 2014 and the Mortgage Credit Directive of 2016. Both measures tightened the affordability criteria on new loans.

The ‘prisoners’ are predominantly borrowers who took out a mortgage before the financial crisis of 2008 and they are told they cannot switch even if repayments on the new loan would be cheaper than their existing deal.


Mr Elphicke offered two examples to illustrate the need for change.

The first was a couple from the West Midlands who took out a Northern Rock mortgage in 2007 and have never missed a payment, but current affordability tests prevent them from switching their loan.


The second was another Northern Rock customer who also took out her loan in 2007 and is now paying almost 5% on a standard variable rate (SVR) mortgage. She is self-employed and her fluctuating income means she fails the affordability test too.

Hers was one of many Northern Rock mortgages sold off recently by the Treasury to American private equity giant Cerberus after they were unable to find an active lender for the deal.

Vulture funds

Said Mr Elphicke: “The Government should be lending a helping hand, not a tin ear.

The Treasury should not be selling mortgages off to vulture funds like Cerberus without protection. The regulators should be doing their bit to help free the mortgage prisoners.

“When selling these books, they should make sure that there are protections so that borrowers do not lose out.”


Ishaan Malhi, chief executive officer of top mortgage broker Trussle, said: “This proposed bill will give hundreds of thousands of mortgage prisoners hope that they may soon have the ability to switch to a cheaper mortgage deal – a step in the right direction to making mortgages fairer.

“This group of people have been overlooked for too long and it’s crucial that the Government step in to help by granting them an exemption to affordability rules.”