Dear Rishi Sunak,
My name is Rachel Neale and I am writing this open letter to you on behalf of, and signed by, UK Mortgage Prisoners’ members and supporters of our campaign.
During the banking crisis of 2008, many of our mortgages were with high street lender, Northern Rock. This was subsequently nationalised and further lending was suspended which put stop to internal product transfers. This meant that our mortgages reverted to the more expensive standard variable rate (SVR). Pre-crash, the SVR was set at 1.5% above the Bank of England base rate. However, UKAR, acting for the Government, increased this margin to 4.5%. Given the difficult economic conditions – housing market, job losses and business closures – many borrowers could not switch to a better deal elsewhere. This was then exacerbated by the Mortgage Market Review (MMR) which introduced a retrospective stress test for new borrowing, meaning that new mortgage applicants would have to prove their income could withstand rates if they increased by 2 -3 %. So, whilst many of our members have been paying between 5- 7% SVRs, we are consistently told that we cannot afford to pay interest rates which are set at significantly less. Many of our mortgages have now been sold to private equity firms with no licence to lend and are not regulated by the FCA. We are trapped and left at the whim of vulture funds whose sole incentive is to maximise shareholder returns. Additionally, those struggling to pay their mortgage during the 2008 crisis who accessed the government Support for Mortgage Interest (SMI) payments now have to take this as a loan to be paid back at the end of the mortgage term. These borrowers cannot remortgage now as new lenders expect this to be paid in full first.
Imagine if the same were to occur in the current crisis:
• Banks were bailed out instead of protecting jobs and furloughing staff
• Banks increased SVRs instead of reducing them in line with BoE
• Mortgage holders coming to the end of their introductory terms were left stranded on these higher SVRs
• Legislation was introduced to make it harder to remortgage instead of introducing legislation that compels banks and other lenders to provide mortgage holidays and payment freezes
• That those who struggled to pay their mortgages during an economic crisis were forbidden product transfers and then sold off to private companies to pay crippling interest rates
Mr Sunak, in our COVID-19 impact report, we provided evidence of the additional financial hardship our members are now experiencing – whether employed, self-employed or retired. Additionally, many of our members are Key Workers. They face the most harrowing of circumstances each day in their jobs, saving the lives of others while risking their own and those of their families. They continue to do this under severe financial pressure and on top of the emotional impact that being a mortgage prisoner already has – as highlighted in our mental health report . We are concerned that this current crisis may create many more – particularly where mortgage holders may have to rely on SMI payments in the aftermath.
We are calling on you to act now to help mortgage prisoners. Any solutions that have been put forward thus far have yet to translate into anything tangible for mortgage prisoners.
We believe there are simple yet effective solutions to our situation:
• Stop selling British mortgages to vulture funds
• Extend the regulatory perimeter
• Cap margins on SVRs
• Bring our mortgages back under active lenders to give us the choice to product transfer
We would also propose that bringing all mortgages back within high street, regulated lending would be of significant benefit to the post-COVID recovery as fairer mortgage rates would mean many 1000s of mortgages prisoners injecting disposable income into the economy. Please act now to support mortgage prisoners in the short and longer term so that we are not forgotten within yet another crisis, when we are still living in the one of the past.
Signed by mortgage prisoner members and supporters of the campaign