MSE and LSE urge the government to offer mortgage loans
MoneySavingsExpert (MSE) and the London School of Economics (LSE) have called on the government to introduce interest-free principal loans to help mortgage prisoners re-mortgage.
MSE commissioned the report from LSE, and the two made a series of recommendations to improve the situation for people who are stuck with their current lender.
People with unsustainable mortgages should also stay in their homes as tenants. At the same time, the property is sold to housing associations with a buyback option.
There were calls for ‘Together’ loans to be removed as an obstacle. These were loan products issued by former lender Northern Rock, which were often exceeded 100% of a property’s value and consisted of secured and unsecured debt. As it stands, borrowers can only re-mortgage if the unsecured debt is untied. However, LSE found that if borrowers cut the bond, it can trigger a sharp increase in interest on the unsecured item.
Meanwhile, the report says that all owners of “closed books,” in which loans are sold to a company that cannot offer another mortgage, must be within the regulatory perimeter of the FCA.
Mortgage prisoners are up to 40% more likely than other borrowers to default due to the coronavirus.
“Intervention is needed to help mortgage prisoners.”
Martin Lewis, the founder of MoneySavingExpert.com, and who funded the LSE investigation, said: “Mortgage prisoners are the forgotten victims of the 2008 financial crash. At that time, the government chose to bail out the banks. Still, unfairly, immorally, hundreds of thousands of its victims were left without adequate help, trapped in their mortgages, and the financial misery caused by it. And they have been forgotten ever since.
“The Prime Minister has promoted the idea of subsidizing 5% deposit mortgages for first-time buyers. Along with that, there is a moral responsibility to release the money to free mortgage prisoners from their hardship.”
“I was delighted that Treasury Minister John Glen agreed in advance to review any policy proposals the LSE came up with. The independent, practical solutions in this report leave no excuse not to address this. However, as an urgent first step, the government must agree to do the repair work, using critical data it has access to, to cost the solutions in full.”
“Speed is needed now as the coronavirus has wiped out people’s livelihoods. But for people whose finances and freedom have already been destroyed for more than a decade, they had already reached the breaking point: they are now defeated. No one should underestimate the detriment to people’s lives and well-being if the Treasury does not act and acts soon. Intervention can and will save lives.”
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