The Mortgage Broker – One Year On
by Gail Smyth*
Just over a year ago I watched “Trapped by My Mortgage”. This is because I am a mortgage broker. I was curious to know what was going on in the industry that I have worked in for over 30 years. I thought I knew it all.
I was shocked!
Credit should be passed onto Cat McShane for her brilliance in bringing this topic to the attention of the general public.
Who is a ‘Mortgage Prisoner’?
Wanting to know more, I googled and investigated what I had seen. A lead took me to the Facebook page for ‘Mortgage Prisoners’. Such a horrible term!
Mortgage Prisoner = Being locked into a life of consistently high mortgage payments with no option to find the solution for a reduction in monthly mortgage payments.
Typical examples of ‘Mortgage Prisoners’ are where clients are:-
- Stuck on higher than average Standard Variable Rates through no fault of their own.
- Trapped by negative equity, even though we have come out of the recession.
- On interest only mortgage with terms that are now coming to an end.
- On traditional repayment mortgages just simply paying more than they need to.
Rules made to help, that hinder!
The introduction of the European Credit Directive stopped any lender being able to make a rational decision to lend based on the client’s ability to pay. Affordability rules which were designed to keep future mortgage holders safe and with mortgage parameters that should ensure that they don’t overextend themselves, have backfired on those consumers that are left with:-
- a mortgage with a lender that isn’t a lender;
- with no banking licence; and
- no ability to renegotiate their mortgage terms.
In simple terms, an admin company (or companies) that are just looking to profiteer by charging over the odds on the interest rates.
How had I been so blind as to miss this? This is a huge story and the industry has not been able to change this. Europe – love it or loathe it and Brexit aside, the Financial Services industry is being governed by their rules and their legislation.
As many as 200,000 consumers stuck with nowhere to turn to. How had this happened? How had this been allowed to happen?
The Facebook page led me to contact Rachel Neale. I had watched messages come in thick and fast via Social Media. People were coming together all with the a common theme, all relieved to hear that it wasn’t just them. Those that thought they had been singled out as bad payers, where the shame suffered by some of these consumers was too much to bear in many cases.
Actions speak loader than words
I had to do something! Being a mortgage broker and offering up my services single handily to help each client individually, although initially helpful, I knew it wouldn’t have the impact I was looking for. I wanted to look at the bigger picture. What had gone wrong and how could the industry help?
Where to start……
Working together with Rachel we were able to identity the key issues and break down the terminology into language that made sense both to the rest of the project team and most importantly to the consumer. You must remember that most consumers only understand a fraction of what was going on at the point that they entered into their mortgage contract.
Most consumers usually only want to know the key question of “what will it cost me?” We were on a mission to educate these consumers over the following months, days and hours to the point they would be breathing and sleeping mortgages.
After a couple of months, I realised that I also needed to know more. Simply translating terminology and looking at isolated scenarios wasn’t enough. Could I help the consumers after all?
Road Trip Reality
I went out on the road, leaving the Garden of England behind me. I travelled to Bournemouth, Leeds and Blackpool. I wanted to know if there was a trend that I was missing. It was at this time that I got a real flavour of what this was about, one meeting stood out for me.
The client I met was a proud man
The client in question spoke about his “Ground Hog” month. Each month dreading the day that his mortgage payment was due to be collected. He needed to keep a roof over his head because of his daughter, but the pressure of meeting such high mortgage payments was becoming intolerable. His lender/admin company refused to allow him to swap his payments to an interest only basis, even for a short period of time, to provide him with respite that they so badly needed. Yet, as was the pressure, he told me about the time he had walked to the local park, picked a tree and thought that ending his life was easier than living that “Ground Hog” moment each month. He was not high risk and had a lovely loan to value. He was making his mortgage payments, but on paper his affordability didn’t allow him to borrow the same amount of money but pay less each month. Something that would have relieved the pressure for him and his family.
After that appointment I cried. How could this be right? I thought I was a good problem solver, but I couldn’t help this man. Life just isn’t fair! This made me more resolute than ever to help and make a difference.
Progress to date
Rachel was arranging meetings left, right and centre, and she continues to do so! Politicians, the All-Party Political Group, The Financial Conduct Authority and the Financial Ombudsman Service.
I attended every meeting, I have written reports and summaries, I have prepared spreadsheets of showing how much over and above that the consumer is paying, and I have had my statement read out in Parliament as part of a 3 hour debate to discuss how the Treasury were going to help the Mortgage Prisoners.
I have met the “Heads of…” companies and business that I had learnt to respect and trust. Legislation is there to protect the consumer (and the broker). How nice has it been to work in the financial sector with complete transparency for all, but with this one exception…..the sector that holds Mortgage Prisoners.
Challenges going forward
I have always been proud to be part of the Financial Services industry, but now, with the exception of Mortgage Prisoners, and what is already heavily documented in history. I won’t go into the background of how the story of 12 years ago played out, but I will say that I continue to be saddened by what I now know and how unreceptive the industry and the Treasury are to put a resolve in place.
I accept this needs a change of legislation. I am not so stupid to believe that waving a magic wand will solve it all, but some simple amendments and tweaks could make life easier for every one of the Mortgage Prisoners.
I am lucky. I am not a Mortgage Prisoner. I have always taken this for granted but not anymore. How many other people have I meet along the way that are making the decisions, that also take their personal financial position to for granted. I would hazard a guess that there are more that do, than do not.
I look back to year ago, the research, the meeting with Rachel, the trips to London and trips to Parliament, for what I now realise was a very simple letter to MP’s in the beginning, which has now taken us all down a much longer path.
*Coming soon, you can contact Gail Smyth by heading over to the the financial section on the ‘signposts’ page