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UK government made £2.4bn from ‘mortgage prisoner’ sales

The UK government made a £2.4bn “profit” when it pushed tens of thousands of mortgage borrowers “into poverty” after selling their loans to new lenders, the campaigner Martin Lewis has claimed.

The MoneySavingExpert founder spoke at the launch of a report, which he founded, into the plight of “mortgage prisoners”: a group of borrowers caught up in the fallout from the 2007-08 financial crisis.

Many initially took out their home loans with lenders that had to be rescued during the crisis, including Northern Rock and Bradford & Bingley. Subsequently, their mortgages were sold to providers that did not offer new deals – leaving some trapped on high-interest rates and unable to move to a cheaper product.

However, the number of people who fall into the category of mortgage prisoner appears to be disputed. MoneySavingExpert has suggested the number is 200,000. However, in late 2021, the Financial Conduct Authority said that while an estimated 195,000 households had debts sold to “inactive” lenders, the number “who are mortgage prisoners” was 47,000.

These people were up to date with payments but unable to switch because their mortgage or circumstances would deter a lender.

The new report from the London School of Economics and Political Science (LSE), commissioned by MoneySavingExpert, claimed that Office for Budget Responsibility documents confirmed that “the UK government has substantially recovered all actual and opportunity costs suffered” and indicated that the sale of the loans to inactive lenders “had generated a £2.4bn surplus”.

It added: “It might well be argued that this gives sufficient headroom to allow the government to step forward and help struggling borrowers.”

MoneySavingExpert said the mortgage prisoners “have suffered financially, mentally and physically for over a decade”.

It added: “In the past year, near-monthly rate rises have seen some prisoners’ rates leap from 4.5% to as much as 8.29%. Groups representing mortgage prisoners have told MSE that some have even sadly taken their own lives.”

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