Mortgages

(asked on 24th October 2022) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether his Department has made an assessment of the potential merits of incorporating closed book mortgages into existing mortgage regulatory frameworks.


Answered by
Andrew Griffith Portrait
Andrew Griffith
Minister of State (Department for Science, Innovation and Technology)
This question was answered on 27th October 2022

The Financial Conduct Authority’s (FCA) review into mortgage prisoners, published in November 2021, found that there are 47,000 mortgage prisoners who might benefit from switching to a new mortgage deal but are considered too high risk to do so, despite being up to date with payments.

The review makes clear that the reason mortgage prisoners are unable to switch are varied and complex. As such, there is no silver bullet to address the circumstances of this entire population of mortgage holders without being unfair to other borrowers.

The Government has already worked with the FCA to implement changes to its mortgage lending rules, removing the regulatory barrier that prevented some mortgage prisoners, who otherwise may have been able to switch, from accessing new products. These rules should allow customers to switch to an active lender as long as they meet the lender’s risk appetite and certain criteria, such as not looking to borrow more.

Ultimately, the pricing and availability of mortgages is a commercial decision for lenders in which the Government does not intervene. As such, the Government cannot force lenders to lend to borrowers that sit outside of their risk appetite.

Any further work on this issue must consider the impact and practicality of solutions and their effects on the wider mortgage market, including the resilience of firms and fairness to other borrowers. There is no evidence, for instance, that consumers have experienced detriment that would be resolved by an extension of the regulatory perimeter. It is also worth noting that the Standard Variable Rates (SVRs) charged by inactive firms are in line with those paid by borrowers in the active market. The Government remains open to practical and proportionate solutions to help mortgage prisoners that do not pose unacceptable financial stability risks, and are not unfair to other borrowers in the mortgage market.

More broadly, the Government understands that people across the UK are worried about the cost of living. That is why we have announced £37 billion of support for the cost of living this financial year. We have also taken decisive action to support millions of households with rising energy costs this winter through the Energy Price Guarantee and the Energy Bill Relief Scheme. Millions of the most vulnerable households will receive £1,200 of support this year, with additional support for pensioners and those claiming disability benefits.

When mortgage borrowers are in financial difficulty and struggling to pay their mortgage, FCA guidance requires firms to provide support through tailored forbearance options. The Government also offers support to borrowers through Support for Mortgage Interest (SMI) loans to homeowners in receipt of an income-related benefit, and protection in the courts under the Mortgage Pre-Action Protocol.

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