Mortgage Prisoners

Martin Whitfield Excerpts

Thursday 6th June 2019 Commons Chamber

[Martin Whitfield (East Lothian) (Lab)]

It is always a great pleasure to follow the hon. Member for Ayr, Carrick and Cumnock (Bill Grant). I thank the hon. Member for Dover (Charlie Elphicke) for co-sponsoring the motion, the all-party groups for their work and the Backbench Business Committee for facilitating a very important, timely debate for the mortgage prisoners.

To own our own home is one of the aspirations of this society, but to have safe, secure accommodation is a basic need within the hierarchy of needs. Without that, nothing else can happen in a family or for an individual, so how has this country, which ranks home ownership so highly, found itself in a position where we are debating the situation of citizens who are trapped in a contract to make repayments to stay in their property, but who are unable to exercise the right to pay off that mortgage debt against their property so that they can benefit from lower interest rates and make lower monthly payments?

Most people’s understanding of home ownership is that they find a property, approach a lender and suggest the amount that they can put forward by way of deposit. The lender then lends them the difference so that they can purchase the property, and they repay the lender the principal sum and an additional sum by way of interest. They have the property, they are repaying the principal and they pay the interest. When someone wants to move, they sell their home, repay the amount owed, acquire their new property and borrow again. Alternatively, if they can find someone who will lend to them more cheaply, they use the money that person lends to repay the original lender and they move forward, freeing up some of the equity in their house or taking the benefit of lower payments.

Some of us are old enough to remember the silly idea of saving with the building society. We would pay in money month after month, building up a track record of financial stability so that when we found a property we would be lent other people’s money so that we could buy our property. That would be decided on the basis of our financial history. At this stage, I would like to cue the music from “It’s a Wonderful Life” with James Stewart, who acted as George Bailey, who chose to whom he would and would not lend other people’s money from the town. If only we could go back to that and say no to the algorithms and the committees that have led to the bundling of what are called “risky loans” that are sold on. The people who are trapped in their mortgages find that they owe money not even to the original lender, but to someone else who might be abroad and for whom there is just an email address and no regulation, and who controls their mortgage, the interest rates and the payment periods. There is nothing that the borrower can do.

That might be an oversimplification, but it is a reality for constituents. As the hon. Member for Dover pointed out, it works out as between 300 and 400 people in every constituency in the United Kingdom. They are our friends, neighbours and families. These are not risky mortgages. These are individuals who, in many cases, have never missed a payment in their lives. These are people who understood that when they took out the mortgage they would go to the ends of the earth and cut other things so that they made the mortgage payments at the end of the month, because they wanted their house. They made that honourable contract and unfortunately today, it is with another party that, I will say, is less than honourable.

A blame game is developing. There are arguments between the interested parties over the fact that this is all the fault of the EU and the legislation that was tightened around the lending market. There is the almost nonsensical situation that if someone remortgages with an existing lender, which admits that it is the lender, that person can bypass the requirements for the payments but cannot do so with a new lender.

The reality is that the UK Government, in seeking to do right, as they believed they were with Northern Rock and Bradford & Bingley, bundled up and sold mortgages to companies—these vulture funds—such as Cerberus, which we have heard about. They have trapped individuals and families as mortgage prisoners. The action of the UK Government and industry led to the selling of loans that the borrower had no say over to an unregulated, overseas vulture fund. The job of such a fund is not to lend money; it is a financial model to exploit and make profit. It would appear that following the successful stamping out of “poor lending”, a new practice—a new fertile field of exploitative profiteering—has been created, and the UK Government are partly responsible for that.

In my short time in the House, I have sparred with the Economic Secretary possibly more than with any other Front Bencher. It has been a great pleasure, and I know him to be an honourable man. Let me take him back to what he said in a letter, because I genuinely believe it to be the case:

“I can commit to a determined effort to resolve this. There is no reason why these individuals should be left in this very difficult position.”

I hope that today is the day on which he will be able to set out a way to resolve this problem.

--- Later in debate ---

[John Glen]

On the hon. Gentleman’s first point, the regulator is not making up these rules in isolation in an ivory tower. It is working with industry representatives to ensure that the changes it delivers will create an environment with an effective outcome. There is no point having a solution that does not solve the problem. I cannot set out the range of options that will exist, but I am confident that the work being undertaken by the FCA will lead to an effective outcome. I will come to the hon. Gentleman’s second point later when I talk about the points that he and others made about Cerberus.

[Martin Whitfield]

Did I hear the Minister correctly when he said that this will not extend to any sum beyond the existing loan, and that there will therefore be no facility to enter any of the equity that has accumulated, in some cases?

[John Glen]

As I have tried to set out, I am not the arbiter of this specific issue, and it would be wrong for me to be drawn into the outcome before the consultation has concluded. That is imminent, however, as is the implementation of the solution.