HUNDREDS of thousands of mortgage prisoners have been given hope as Martin Lewis has revealed he’s donating £25,000 to help borrowers get better deals.
The MoneySavingExpert.com founder has given the five figure sum to the London School of Economics and Political Science (LSE) so they can research how to “free” trapped borrowers.
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Currently, around 250,000 homeowners have mortgages with lenders that aren’t authorised to give out new loans or to offer them a remortgage.
Of these borrowers, around 170,000 are up-to-date with payments and would be eligible to switch to a cheaper loan if it wasn’t for their lender – something that could save thousands every year.
Just under half of these borrowers pay an interest rate of more than 3 per cent.
Regulator the Financial Conduct Authority (FCA) relaxed borrowing rules in October 2019 to enable these homeowners to switch but it says uptake of this by lenders has been low.
And that’s where Martin steps in, he wants LSE to find a solution to the problem that will push the government to act.
Martin says one example could see the government subsidising competitive lenders to enable them to offer mortgage prisoners a decent deal.
I’m terminally ill and trapped in my home
CHRISTINE KINSELLA, 60, drew up a bucket list of dream holidays when she was diagnosed with a terminal lung disease.
But instead, the hospital worker will spend her final years working to pay off her mortgage, which she says is stuck on a “stupidly” high interest rate.
Christine’s mortgage problems began a decade ago when her lender, Northern Rock, went bust.
It led to her and thousands of others being trapped on a sky-high mortgage tariff.
She has repeatedly tried to move to a more competitive rate.
But the best her new lender — Landmark Mortgages — says it can do is a variable “loyalty rate” of 4.54 per cent, down from 4.79 per cent.
Christine said her bid to escape the high rate became more pressing a year ago when she found she had idiopathic pulmonary fibrosis.
She said: “The life expectancy of this disease on diagnosis is three to five years.
“I haven’t deteriorated too greatly in the last 12 months and I’m on a new medication, so I hope that I have more than five years.
“But the thought of working full-time is just not fair, as I know I will deteriorate and be unable to work eventually.
“I would like to reduce my hours but I have to feed this voracious mortgage.
“I just hope I live long enough to pay it off.”
He said: “It’s time the government accepted the responsibility to find a solution for these vulnerable consumers. Its failure to do so is short-sighted.
“The cost of mortgage prisoners doesn’t just fall on the individuals, it falls across society as it can leave them dependent on the state.”
Martin added: “It’s worth remembering the government spent billions bailing out one set of victims of the financial crash – the banks. Yet it’s done nothing to help another set – those locked into high-rate mortgages.
“In fact it’s actually responsible for some of their pain, selling the mortgage customers of former lenders such as Northern Rock and Bradford & Bingley to inactive lenders, that have no other mortgage products, or firms that are not authorised to offer new products.”
An HM Treasury spokesperson said: “We’ve introduced rules that make it easier for some customers to switch.
“We now want to see more people offered these new deals and have been working closely with the sector on this important matter.”
Jackie Bennett, UK finance director of mortgages at trade body UK Finance, said: “UK Finance is working with a wide range of banks, building societies and specialist lenders to help them develop new products for borrowers with inactive firms who are eligible under the FCA’s revised affordability criteria.
“We are also actively considering other practical ways in which these customers could be helped.”
The Sun has contacted the FCA.
A legal battle has also been launched to help hundreds of thousands of mortgage borrowers affected.
There is also a related mortgage prisoner issue affecting around 30,000 home owners who took out their mortgage or last switched before the financial crisis.
After the crash, lenders introduced tough new rules making it harder for existing borrowers to switch around.
