UK Parliament / Open data

Financial Services Bill

Proceeding contribution from Duncan Baker (Conservative) in the House of Commons on Monday, 26 April 2021. It occurred during Debate on bills on Financial Services Bill.

There is a famous saying, is there not, that an Englishman’s home is his castle, but the problems born out of the banking crisis in 2008 still persist. Indeed, there are a quarter of a million households with mortgages affected by lenders who suffered at that time. They are with inactive lenders, and in simple terms their mortgages are stuck with non-lending asset management funds.

We know that the Government have looked at many of those borrowers to try to help them so that they can switch lenders. Many of them can—almost half of them—and they can benefit largely from doing so, but it is the remaining half that are our real problems, the so-called mortgage prisoners. Their rates, as they came off the original term deals, moved on to the standard variable rate we have heard about tonight, leaving them paying such disproportionately high repayments. Their lender’s debt was sold on, and as such they cannot remortgage or switch, leaving many families struggling immensely to manage each month. Lords amendment 8 would require the FCA to introduce a cap on those standard variable rates and ensure that mortgage prisoners can access new fixed interest rate deals.

I know there are huge amounts of work going on to try to help these people, not least by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake)—I thank him for all the work he has done—but also by the Minister, who has been a tower of strength. He has been talking to me far too much about how we can help these people, and I thank him greatly for that. It is an absolute must that we do keep helping these people.

First, the 70,000 mortgage prisoners who are in arrears, would—for many reasons, unfortunately—potentially not be a better position if they were in the active market, as borrowers are unlikely to be able to switch within the market, given the very stringent risk criteria

there are today. The Government are trying to support these householders with the initiatives we have heard about, such as the breathing space scheme.

It is the remaining 55,000 who have kept up their repayments that I particularly want to make sure the Treasury can really help and work on solutions for. I know there are again attempts to modify the affordability criteria assessment to try to move those people on to a new lender. Notwithstanding such efforts, those solutions are not the final answer. So what is the answer? Is it Lords amendment 8? Do we interfere with a market?

8.45 pm

I should know this from experience, because I have asked the Chancellor before about other scenarios: rarely, and for good reason, do we create interventions in the market. The ramifications and unintended consequences can easily have knock-on effects. What if those in the active market on high interest rates, struggling to make repayments and perhaps affected recently in the pandemic, are now in arrears and unable to switch? Where do we draw the line of the cap for those in the inactive market without prejudicing those in the active market? Market intervention is the easy answer to an incredibly difficult and complex problem that we must solve, but the easy answer is not necessarily the right answer.

As much as it pains me not to be able to pass a quick simple fix, patched on this problem by this amendment, it is not a workable solution that addresses the problem adequately. I will keep working with Ministers to ensure that, absolutely, we work with the FCA to look for the workable solution to this and to help borrowers end their misery. In summing up, I hope that the Minister will give us hope and progress on helping those people effectively.

About this proceeding contribution

Reference

693 cc106-7 

Session

2019-21

Chamber / Committee

House of Commons chamber
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