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Early in October I spent an hour creating a podcast with the UK Mortgage Prisoners Action Group.  What this brought home to me was the sheer variety of mortgages caught; the different circumstances of the consumers; and the complexity of events that had conspired to bring these people to the place they were now in.  Much of this was created in the heady days of 2005 to 2007 when the mortgage industry was in a crescendo of ‘anything you can do, I can do bigger’.

The hour was spent answering very direct questions about people’s circumstances and if they could be helped.  For technical detail I was assisted by Andrew Montlake.  What was obvious was that people were very transparent about their issues.  However behind all of these cases there was not just a mortgage, but a family struggling to understand what their options might be, having to cope with costs they see as unfair, bringing up families paying more than they should and in some cases failing to put quality food on the table in order to keep the roof over their heads.

It was the FCA’s MMR affordability rules that limited many of these people’s ability to move to a new lender.  Their decisions to shut down self certification, for a period demonise interest only and encourage detailed assessment of incomes and costs has tied these people up.  With the additional need for lenders to adhere to stress testing, this only compounded the position.

What is the great elephant in the room is the historical action of UK Treasury.  Having acquired the mortgage book of failed lenders, the decision to sell them back to the market through UKAR, rather than keep them, was theirs.  They made the decision to sell to unregulated asset managers.  They made the decision to optimise the price paid by the new owner for those on higher interest rates, without fully considering what this might mean in the longer term for the customer.  They optimised the value for the UK tax-payer at the price of the individual.

The FCA has produced modified affordability rules and lenders are now coming to market with propositions which will help some of those who will be written to over the next 6 weeks.  However, even best estimates indicate that this might help about 10% of the prisoner population.  At a time when Government is spraying money at people like confetti, there are some here who deserve a better fate than that delivered when they were sold to unregulated identities as a commodity.  The challenge for brokers is do what you can to help find these mortgage prisoners a better lender, and the question to Government, surely there is something you can do?

Robert Sinclair
Chief Executive, AMI

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