An SNP MP has called on the Prime Minister to support “mortgage prisoners” – pointing to “another shocking example of government and private sector collusion” amid the Post Office Horizon scandal.
Some mortgage prisoners have been trapped on high rates since the 2008 financial crisis.
Borrowers entered into loans with lenders that subsequently failed and they have often been rejected when applying for cheaper mortgages because they do not meet toughened borrowing criteria brought in following the crisis.
Many have loans that were sold by the state to “closed book” inactive lenders, often investment companies that are not regulated to lend new mortgages, making it difficult for them to move to cheaper rates.
Warnings have been issued that mortgage prisoners have suffered mental health as well as financial consequences.
Read more: Horizon IT scandal: Scottish victims to be cleared
A report published last year by the London School of Economics (LSE), suggested introducing free comprehensive financial advice for mortgage prisoners.
It also suggested that UK Government equity loans along the model of Help to Buy, interest-free for the first five years. This could involve an equity loan for a maximum of 40% of the value of the property in London, and 20% elsewhere, which could be used to pay down the mortgage and other existing debt.
There could also be a UK Government guarantee for active lenders to offer borrowers new mortgages, helping borrowers to find loans in the mainstream market.
The LSE report estimated the net overall cost of the programme could be between £50 million and £347 million over 10 years, depending on take-up.
But the UK Government has been criticised by campaigners for sitting on their hands.
Read more: Lord Advocate apologises to those ‘failed’ in Horizon scandal
Speaking at PMQs, SNP MP, Martin Docherty-Hughes, warned Rishi Sunak to act on the scandal, unlike the many years of injustice facing the Horizon victims.
He said: “While there’s rightfully been much attention paid to the Post Office Horizon scandal, there is another shocking example of government and private sector collusion that began under the last Labour administration and continued under the Tories.
“Almost 200,000 mortgage prisoners who borrowed with high street lenders such as Northern Rock have become trapped after the portfolio was sold off to foreign entities like Topaz Finance and Heliodor who have been creaming off extortionate revisionary standard variable rates, essentially since 2008 – leaving even those who kept up with payments in danger of having their homes repossessed.”
He added: “200,000 aspirant home-owners have had their dream taken away from them.
Read more: Horizon scandal: MSPs told Post Office acted 'like the mob'
“So can the prime minister, instead of playing catch-up like he is doing with the Post Office scandal, meet with me and campaigners to discuss what more can be done for mortgage prisoners.”
In response, Mr Sunak said he was aware of the issues, but stressed there was no easy and quick fix.
He said: “I am familiar with the situation with mortgage prisoners – it’s something I worked on as chancellor.
“I know the Treasury and the current Chancellor have been engaging with campaign groups and others to find ways to resolve it.
“It’s not an easy situation to fix overnight, but there are things that are being looked at as we speak.”
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