Plight of Kettering 'mortgage prisoner' raised in Parliament

The plight of a ‘trapped’ Kettering mortgage prisoner was raised in Parliament as part of calls for the Government to support those in the same boat.

Kettering MP Philip Hollobone told MPs of the situation facing one of his constituents – named as Valerie – during a debate in Westminster Hall last week.

She is one of about 200,000 people who are unable to switch mortgage providers and are stuck with a high variable rate. Most are in the position because of the 2008 financial crisis and because they were unable to meet the new conditions of more stringent criteria on borrowing, designed to help prevent another financial crash.

During the debate Mr Hollobone (Con) read out the contents of a letter Valerie had sent to him.

She said: “I have been a mortgage prisoner since the initial crash of the market and, despite never having missed any payments or been in arrears, I am unable to remortgage as I cannot meet the new current affordability rates due to the LTV (loan to value) ratio of my property.

"I am now paying an almost eight per cent variable rate.”

Mr Hollobone, a former investment banker, called on the Government to help those in the same situation.

He said: “Is it not the key point here that mortgage prisoners such as Valerie have done nothing wrong?

"They have met all their payments and have never been in arrears, but they are trapped. They urgently need relief from the Government.”

Most mortgage prisoners have mortgages with lenders who became “inactive” and stopped competing in the market for new customers. Examples include Northern Rock and Bradford & Bingley, following their nationalisation. Some borrowers found they couldn’t remortgage and became trapped in paying higher interest rates than those offered by active lenders.

The debate heard that statistics suggest that the mortgage rates of millions of people across the country are shooting up by five or six per cent but that some mortgage prisoners are paying 12 or 13 per cent. The average mortgage prisoner is paying nine per cent.

The situation was described as a ‘scandal’ in Parliament and there have been calls for the cap on standard variable rates to be two per cent above the base rate.

MPs were told that, when the Government sold the Northern Rock and Bradford & Bingley mortgages, they could have sold them to active lenders that would have offered mortgage prisoners new deals. But the debate heard that mortgages of mortgage prisoners were sold to ‘vulture funds’ and inactive lenders, which have ‘exploited’ homeowners through high interest rates.

Martin Lewis, creator of MoneySavingExpert.com, described mortgage prisoners as “the forgotten victims of the financial crash”.

He previously said: “People have been left in financial, physical and mental misery, exacerbated by the pandemic and cost of living crisis ripping through their already dire situations...the Government has a moral and financial responsibility to mitigate some of the damage done.”